Buying Property Flip Homes Mortgage Guidelines
This blog will cover buying property flip homes with little to no renovation experience. Buying property flip homes with little or no experience can still be profitable. Investors buying property flip homes can access financing easier than ever with little to no experience. The housing market is booming. Home prices have been skyrocketing every year for the past seven years. Due to rising home prices, HUD and the Federal Housing Finance Agency have increased FHA and Conventional loan limits for the past seven years. Many real estate investors hoped for a housing market correction last year when the coronavirus outbreak hit the United States. Not so fast. In the following paragraphs, we will cover buying property flip homes.
Is It Hard Buying Property Flip Homes and Make Money?
The housing market skyrocketed despite the coronavirus pandemic and surging unemployment rates. The Down Jones nearing 30,000 under the Trump Administration, plummeted to 18,000 during the pandemic. However, in less than one year, the Dow Jones Industrial Average is at 34,000 while the economy is not fully recovered from the COVID-19 pandemic. The housing market is booming. Home prices have been increasing year after year since 2012 with no sign of a correction. There has been a major increase in real investors buying property flip homes due to the resurgence of non-QM and alternative loan programs for real estate investors.
Buying Property Flip Homes During Booming Housing Market
Home prices are still skyrocketing due to low inventory and high demand for housing. Buying Property Flip is a sure thing during the booming housing market. There is a major shortage of homes versus the demand for homebuyers. Property flippers are raking in tens of thousands of dollars in profits. The homes they are trying to flip are normally under contract before the start of the renovation. Many homebuyers are eager to purchase a property flip from an investor. This article will discuss and cover profiting from buying property flip homes for real estate investors.
Investing In Real Estate During Booming Housing Market
There is no doubt the real estate market is booming. Today’s general norm in the housing market is homes selling 10% or more above the list price. Never in history has the housing market been so hot. The demand for homes far exceeds the inventory of housing. This holds true in all 50 states. First-time home buyers or seasoned buyers interested in buying property flip need to realize that lenders will have rules and regulations when buying property flip.
Buying Property Flip Homes Explained
Buying Property Flip Homes is when a home buyer purchases a property with the intention of re-selling it within a year after the home purchase. Buying Property Flip is also called fix and flip and house flipping. Most real estate investors who purchase a property intending to flip it within 12 months normally purchase foreclosures or REOs that need repairs. They normally purchase it with cash or a line of credit since the property cannot be financed. Their goal is to spend as little money as they can and sell it for the most that they can as fast as they can.
Due Diligence In Buying Property Flip Homes
Homebuyers buying property flip need to make sure of certain things to ensure their home purchase will close. Nothing is wrong with buying property flip. However, lenders will scrutinize borrowers buying property flips within the past 12 months. They want to ensure the property flip is not artificially inflated. Many lenders will require two or more appraisals before lending on property flips to ensure the property’s value is strong and not inflated. Lenders have additional rules and regulations when financing borrowers buying property flips.
Lending Process In Buying Property Flip Homes
Property flips used to be very common before the 2008 real estate and credit collapse. Before the real estate meltdown, real estate values increased yearly. Sometimes double-digits. Anyone with a pulse could qualify for a mortgage with subprime loans. Nothing is wrong with making a profit in real estate, said Alex Carlucci, a senior loan officer at Gustan Cho Associates, about buying property flip homes.
Many folks with no real estate experience became novice real estate investors. Whatever property they purchased increased in property value. These novice real estate investors made money just by purchasing and selling a home months later at a good profit.
They had multiple bids on their property, sold them, and continued the process. Then the major real estate crash of 2008 happened, and real estate prices plummeted. Due to the real estate crisis of 2008, regulators are being very careful for house fix and flip developers artificially inflating home prices where consumers get the wrong end of the stick.
Increased Popularity With Flipped Properties
With the comeback of non-QM loans and bank statement loans for self-employed borrowers, more and more real estate investors are getting into the fix-and-flip real estate business. Real estate values have now stabilized, and home flippers are back. Homebuyers like buying property flip homes, says Ronda Butts, a dually licensed realtor and loan officer at Gustan Cho Associates:
Since there are thousands of foreclosures and REOs on the market, home flippers are purchasing these homes at bargain-basement prices and re-selling them within a year for a good profit. Lenders are aware of this. The government has implemented mortgage lending regulations concerning buying property flips.
Home flippers will purchase a home via foreclosure, sheriff’s sale, or REO. House flippers remodel the home and list it back on the market. Nothing is wrong with this. But homebuyers who are buying property flip they may run into some obstacles on a home purchase that is a flipped property.
Two Appraisals Are Required Buying Property Flip Homes
The mortgage lender will require a HUD from the property seller for homebuyers buying property flip homes. Lenders will review the original purchase price of the flip and the selling price. If the subject property is sold for a large profit, two appraisals will be required to justify the home purchase’s value. The lender will require proper building permits pulled if extensive work has been done. Lenders may also require a home inspection. The lender will probably require an itemized list of all work performed on the property.
Obstacles With Flips Where The Deal Does Not Close
Many property flippers do major renovations to the property without pulling the proper building permits, including additions. The appraisal review department of the mortgage lender will review the original square footage of the subject flipped property from the County Assessor’s Office. They will compare it to the two appraisals. John Strange, a senior loan officer at Gustan Cho Associates, explains the issues you can have buying property flip homes:
Suppose there are discrepancies between the original square footage from the county Assessor’s Office and the two appraisal reports. In that case, the lender will want to see why and assume an addition was done to the subject property.
The lender will want to see that the proper building permits were pulled. If no building permits were pulled and an illegal addition was done, then the seller of the flipped property will need to correct this problem by pulling the proper building permits. This can cause major delays in closing the home purchase or kill the deal altogether.
Buying a Fixed Renovated Versus Fixer Upper When Buying Property Flip Homes
When buying a home that has been remodeled and is a property flip from the seller, ensure proper building permits are pulled. Anticipating two appraisals will be required before getting clear to close and closing on a home purchase. Gustan Cho Associates is a mortgage broker licensed in 48 states with a national reputation for being able to do mortgage loans other lenders cannot do. Over 75% of our borrowers could not qualify at other lenders due to overlays, stress, last-minute loan denial, or not having the mortgage products. At Gustan Cho Associates, we only market existing mortgage loans that are possible at competitive rates. Besides government and conventional loans with no lender overlays, we offer hundreds of non-prime mortgage programs, including non-QM and non-prime mortgages. Homebuyers who need to qualify for a mortgage with a mortgage broker with no lender overlays on government and conventional loans, please get in touch with us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.
This blog on buying property flip homes was updated on June 24th, 2023.
