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tunesmith
59 Posts |
 Posted - 07/09/2008 : 2:21:39 PM
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Here is the scenario. My customer has to sell his home do to a divorce. He also has decided on buying a two family so the 2nd unit will help with his payment. Because he is closing on his current single family home first, his father is going to pay cash and buy the two family for him to move into. Then the son would like to buy the two family back from his dad and wants to do rehab work on it. So I suggested a 203K loan. However, the rep from M & T first says he can't because it's a flip. I explained there is no monetary gain involved as the son will pay what the father paid so this is not a flip in my mind and asked him for clarifcation. Then the next day he says they can't do it because he is purchasing it from a family member. I'm a little confused with the whole deal.
The two family is an REO. Another thought was to have both names put on the initial purchase of the two family and then refi in just the son's name. I don't know if that will be acceptable to the lender who has already approved the father alone.
I'm not looking to do anything unethical so any suggestions must be above board please.
Thanks for any input |
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jpar994
874 Posts |
Posted - 07/09/2008 : 2:25:12 PM
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| Have the Father and son buy the home together then have the house refinanced to pay the father off using the sale price. He will still need a 3% Interest on the property but it will work that way ! |
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bwp4u
72 Posts |
Posted - 07/09/2008 : 2:29:08 PM
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| FHA does not allow ownership transfers for 90 days after a sale to prevent flipping. Example, an investor cannot buy a foreclosed home and turn around and sell it to someone who is getting an FHA loan. You can do it after the 90 day period but it will require 2 appraisals usually. You can do FHA if he buys it from his dad after the 90 but I belive the maximum LTV on non-arms length transactions is 85%, he would have to put that down or get a equity gift. You may be able to get past the 90 day rule if you submit it to HUD for review and it meets their guidelines, either way not a sure thing. |
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bwp4u
72 Posts |
Posted - 07/09/2008 : 2:31:55 PM
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| FHA is also requiring 12 months seasoning on cash out refi's now, keep that in mind if they buy it together. |
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tunesmith
59 Posts |
Posted - 07/09/2008 : 2:38:51 PM
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quote:
Originally posted by jpar994
Have the Father and son buy the home together then have the house refinanced to pay the father off using the sale price. He will still need a 3% Interest on the property but it will work that way !
I did think of that as I said in the OP however, since the father was already approved on his own and this a REO I don't know if that will fly with the selling bank.
Would this process eleviate the 90 day rule. |
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tunesmith
59 Posts |
Posted - 07/09/2008 : 2:42:35 PM
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quote:
Originally posted by bwp4u
FHA is also requiring 12 months seasoning on cash out refi's now, keep that in mind if they buy it together.
I don't believe a 203K rehab loan qualifys as a C/O. |
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tunesmith
59 Posts |
Posted - 07/09/2008 : 2:46:50 PM
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quote:
Originally posted by bwp4u
FHA does not allow ownership transfers for 90 days after a sale to prevent flipping. Example, an investor cannot buy a foreclosed home and turn around and sell it to someone who is getting an FHA loan. You can do it after the 90 day period but it will require 2 appraisals usually. You can do FHA if he buys it from his dad after the 90 but I belive the maximum LTV on non-arms length transactions is 85%, he would have to put that down or get a equity gift. You may be able to get past the 90 day rule if you submit it to HUD for review and it meets their guidelines, either way not a sure thing.
I don't see how this is considered a flip since the property is changing hands for the exact same price from the bank who owns the property. I know the FHA may not see it that way but if looked at logically it should be apparent that is it is not a flip. I may just have to submit it and see what sticks.
Thanks to all for the input |
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