Napa Solano Yolo real estate blog

Investor flips are not a new idea. They just become more prevalent during certain markets and this is one of them. Investors who can purchase homes quickly with cash can cash in on today's lower home prices, often a cash sale is the only way a home in poor condition can be sold.

In today's market in Northern Solano and Yolo county, most sales are funded by FHA loans. FHA loans are popular here right now because they have the lowest down payment, now at 3.5% and they don't require a high credit score to qualify. (Read my Jan 2010 FHA update blog for more information on upcoming changes with FHA loans)

Investors with cash actually help the real estate market in one way and that is that they often buy the abused homes that are in bad condition and they use their own funds to repair and update a home and improve it to a liveable condition. Most of those homes would not qualify for FHA or VA loans due to the basic appliances or structure are not in acceptable condition, FHA appraisers would not agree to approve a lender to make a loan if the home does not have a stove to cook on, for example, or if the electrical wiring were not in a safe condition, or if there were serious amounts of wood rotting or termite damage.

Before Feb 1, 2010, investors could not sell their properties to FHA buyers even if they had come in and improved the property to the higher standards of the FHA appraisers, and that was because of a HUD rule that banned sellers who had owned the property less than 90 days to sell the home to FHA buyers.

That is changed now and FHA buyers can buy just about any house on the market, IF it is in livable condition.

FHA, IRS first time homebuyer tax credit, lower interest rates all equal to buying a home in today's market. Opportunity for some of this will soon be gone, so call your lender today, find out if you qualify for a home loan.   ~Barbara Adams, Realtor SRES, copyright, NapaWebSol subject to Copyscape protection. Feb 3, 2010

Investors who buy former bank owned homes had a problem selling them to FHA buyers before Feb 1, 2010 due to FHA guidelines. Most private buyers are using FHA loans these days because the down payment is only 3.5%. Investors who are buying homes, fixing them up and then wanting to sell them had to wait up to 90 days to close escrow on the sale. These people actually help improve neighborhoods by updating the homes, especially kitchen cabinets, flooring, new paint in and out and sometimes new landscaping.

FHA guidelines also outline all the factors used to approve buyers for loans such as credit scores, short sale or foreclosure in their backgrounds etc.

FHA Approved Condo Communities

As of January 6, 2010:  If you have a question about purchasing a condominium, be aware that your lender must ensure that the condo community is FHA approved or you will not be able to get a loan on a condo in that project. The condo project must meet certain criteria for liens, loans, number of units being used as rentals etc.

Per HUD Mortgagee Letter 2009-46A, “Spot Loan” approvals on condominiums will be eliminated, effective February 1, 2010.  Details here. The HUD database for FHA approved projects will no longer be the most accurate way to guarantee that a unit “is” or “is not” FHA approved.  

When considering purchasing Condos or Townhouses these projects must have already been approved by the FHA and HUD. It is the task of your lender to make sure that the address you are getting a loan approval on is qualified for your fha loan. There is no exception to this rule.

HUD page will only display approved condo or townhouse projects in that zip code or town, so it is suggested you first make a list of zip codes you would consider living in then search for projects. Search the HUD database for condos.

Before you contact the FHA approved project please keep in mind it is very important to already be pre-approved by your lender for your personal financial data and the property you intend to purchase.