Mortgage Articles

FHA Flipping Rules

What You Need To Know About FHA Flipping

When you ignore a relatively unknown FHA flipping rule, you could be stopping a purchase where it stands. Property flipping is when an investor buys a house, makes some improvements and then sells it for a profit. If you have watched any HGTV, you will see that people can easily make a living from this.

However, there is a dark side to property flipping when looked at from the side of mortgage loans. This is particularly true with FHA. If you are a buyer, your lender and realtor should understand FHA flipping rules and guidelines. You should also know about this to ensure that you are on the safe side.

Explaining FHA Flipping Rules

A property flip is defined by mortgage lenders as a home that has been owned for a short period of time and then sold for a sizeable profit. FHA and other lending agents care about this because of the possible fraud which is linked to it. Of course, it is important to remember that this is a possible fraud.

Most of the property flips will be completely legitimate. However, when a property has a significant increase in value with almost nothing being done to it, everything becomes a bit suspicious. There are also many flipping schemes which include key parties in the mortgage, appraising and other industries that use false information to endure that purchases work.

Most of the concerns relate to the value of the property or straw buyers. A straw buyer is one who buys with no intention of living in the property. They will often buy the property at an inflated cost to create a profit for the seller. These are some of the reasons why FHA has created flipping rules.

HUD has broken the FHA flipping rules into 2 time periods. These are ownership of fewer than 90 days and ownership between 91 and 180 days.

To determine the time period of ownership, the clock will start on the deed recording date which is the sate when the seller stakes ownership. The next important date will be the date on the signed purchase agreement along with the date of FHA case file assignment. To clear the initial flip date requirement, the signed contract date and the case file ID will need to be assigned 91 days after the deed recording date. In order to clear the second flip rule period, the purchase agreement date and the FHA case number will need to be assigned 180 days later.

FHA 90 Day Flip Rule

The most restrictive of the established date ranges is the less than 90-day one. In these situations, FHA will not allow any financing of homes which are flipped in less than 90 days after the deed recording date. When there is no FHA insurance, a loan will be impossible. Of course, there are some sellers and transactions which are excluded from this rule and you need to be aware of this.

FHA 91-180 Days Flip Rule

If the property has already cleared the 90-day rule, it could still fall into the next rule time period. During this second time period, the sale of a property for FHA financing is allowed. However, there is a possible second appraisal requirement that may have to be met. The FHA will also not allow the buyer to pay for this.

The second appraisal will be required when certain conditions occur. This will be when the sale price is 100% or more than the price paid by the seller. If a higher priced loan is required and the purchase price is 20% more than the seller’s purchase price, a second appraisal is required.

An example of this will be a house which was purchased for $100,000. If this house is then sold for $200,000, a second appraisal is needed. The mortgage lender will determine the last requirement.

Preventing Appraisal Delays And Additional Costs

The Second Appraisal

In regards to the second appraisal, there are some FHA rules to know about:

  • This will need to be done by a different appraiser
  • Documentation must be included that support the increased value
  • The buyer cannot pay for this
  • A lower value will be used if the second appraisal is 5% lower than the original one
  • The lender must have a 12-month chain of title documenting resales

The FHA may require additional documentation including a second appraisal if the sale occurs between 91 and 365 days after purchase. This will also occur when the resale price is 5% or more than the lowest sale price of the property within the last 12 months. This is very rare, but it can happen.

FHA Flipping Rule Exceptions

It is important to note that there is a possibility of skipping these guidelines. There are certain transactions which are excluded from the FHA flip rules that you need to know about:

  • The property has been acquired by a relocation agency or employer in connection with the relocation of an employee
  • A resale by HUD under the real estate owned program
  • A sale by other government agencies of single-family properties via programs which are run by the agencies
  • The sale of property by a nonprofit which is approved to buy HUD-owned properties at a discount with resale restrictions
  • The sale of a property acquired through an inheritance
  • The sale of a property by a federally or state-chartered financial institute
  • The sale of a property by a state or local government agency
  • The sale of a property in a declared major disaster area upon issuance of a notice of exception from HUD

These restrictions will not apply to a builder selling any newly built properties or when buying a house for a borrower who is planning to use FHA-insured funding. All of these exceptions can be found in the FHA flipping regulations.

Other Loan Options For Flipped Properties

It is important to note that these rules only apply to FHA loans. A buyer who qualifies for other loan products could get financing even in these cases. There are a number of other loan types that can be considered such as:

These other loan options will not have the same flipping rules, but they will generally pay closer attention to the transaction if a short ownership period is in play. Underwriters will verify the length of the transactions. They will also review the appraisal thoroughly to ensure that the home actually matches the value.

Documentation Related To FHA Flipping

You might be wondering if a buyer can start the process of qualification while not being under contract. The answer is we, but if you want the purchase a flipped home, the date of the contract can cause flipping restrictions. To start the review process, the following documents should be prepared:

  • Buyer pre-approval
  • A copy of the recorded deed
  • A list of the improvements made to the property
  • An executed purchase agreement

Facts About Fixed Rate Mortgages And How They Work

For the average person buying a home is exciting and fun. It’s figuring out how to get it financed that is not as much fun. Housing prices and the rates on mortgages vary overtime but a buyer can rely on a fixed rate mortgage to not fluctuate.

What Are Fixed Rate Mortgages?

This type of mortgage is simply one where the interest rate always stays the same amount over the life of the loan. This means that how much you pay each month and the amount of interest that is applied to it will always be the same. The one exception to this is if your homeowner’s insurance or property tax rates change then it could impact your monthly payments. For the average homeowner, a fixed rate mortgage is the most ideal because it’s stable and predictable.

In most situations, a fixed rate mortgage will have a higher interest rate than an adjustable-rate will initially. But ARMs are only lower initially in most cases and then after a certain period of time such as three, five, or seven years, the interest rate goes up. Once that initial period is up, the rate can fluctuate as can your monthly payments and that fluctuation can take place over the remainder of the loan. There are some limits to the fluctuation as most ARMs do have a cap.

The Most Common Mortgages Available Are Either An Adjustable Rate Mortgage Or A Fixed Rate Mortgage

A typical fixed rate mortgage will come with the option of choosing how long you finance for and this can range from 10 to 30 years. The interest rate itself will always stay the same regardless of how long the mortgage is for. Because this is so much more stable it is the preferred type of mortgage for the average homeowner.

The rate of interest paid on an adjustable rate mortgage will fluctuate overtime during the course of the loan. An ARM has its interest rate based on a margin and this is what determines what you pay in interest any given month. The spread remains the same but what causes the fluctuation is the fact that the index changes.

The loan will be adjusted regularly and those changes are based on the terms of the mortgage. When the interest rates increase the borrower will have to pay more and they will need to put that extra amount in their budget to meet the higher payment. A borrower doesn’t need to make this type of adjustment when they have a fixed rate mortgage because it will always stay the same. The one drawback is that they also won’t get the advantage of having their payments go down if interest rates go down unless they refinance.

The fixed rate mortgage can increase if the borrower places property tax and homeowners insurance in escrow. This is due to the fact that insurance and taxes will sometimes go up. This is not the interest rate fluctuating that causes the increase but only the fact that the cost of insurance and taxes went up.

How Long Does It Take To Repay A Fixed Rate Mortgage?

The term of the mortgage is what determines how many years it will take to repay the loan. The most common fixed rate mortgages are either 15 or 30 years. Here are some of the pros and cons to consider with each of these options.

30 Year Mortgage

The biggest pro when it comes to a 30-year fixed-rate mortgage is the fact that the monthly payments can be considerably lower than they will be with a shorter-term mortgage. The drawback to this option is the fact that over the life of the loan you will pay a lot more interest than you would with a shorter-term mortgage. The interest rate is usually more for this type of mortgage as well.

15 Year Mortgage

The pros of this mortgage include the fact that you will pay less interest because it is a shorter term and the interest rate itself will be lower. The reason why more homeowners don’t take advantage of this choice is the fact that the monthly payments are higher.

For most borrowers, the 30-year fixed-rate mortgage is preferable over the 15-year loan simply because the payments are lower. When you go with a longer-term it usually means you can borrow more money. For some homeowners, it means that they can have an additional monthly cash flow that can be applied to other things including emergency savings, children’s college tuition, and other priorities.

For those who have the extra cash flow, the 15-year mortgage may be the better choice because they’ll pay off their home faster and the interest rate will be lower. Because you’re repaying more of the principal it means your overall monthly payments will be higher and this means you’ll need to make certain it’s something you can afford together with other financial goals you have.

Understanding The Difference In Mortgage Lengths

If Jane is a first-time home buyer and she has a tight budget then the length of time she chooses for the mortgage can determine how much she can borrow. If as an example she feels that she can afford $1,000 a month then she may be able to get a payment close to that but the length of the loan will determine how much she can get. If Jane chooses a 30-year fixed mortgage with an interest rate of 4.5% then she can get a $200,000 house and her payment will be $1,013.

If she chooses a 15-year mortgage then the interest rate might be 4% and this would mean for the same monthly payment she would only be able to get a home that was $137,000. This means that if she goes with a 30-year fixed loan she will be able to borrow an extra $63,000 while maintaining the same monthly payment. Of course in that situation, she would pay more interest.

If Jane decides to borrow $200,000 on a 30-year fixed mortgage at four and a half percent then she will pay $164,813 in interest over those 30 years. If on the other hand, she goes with the 15-year mortgage at 4% then she will pay only $66,288 in interest over the mortgage. That means she will save $98,525.

Compare Rates

There are always a number of options that you’ll want to consider. It’s best that you understand exactly how much you’ll be paying in principal and interest and this can easily be done using a mortgage calculator. Obviously, a lender will be more open to offering a competitive rate and terms to those who have a stronger credit history.

Before making a decision,k let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Contact us today Or Call Us @ (877) 280-4833

What Is An Interest Only Mortgage

Interest Only Mortgage Loans

An interest-only mortgage does not decrease the principal loan amount but rather the installments only cover the interest charged on the loan amount every month. This basically means that you will always owe the same amount to your loan provider as you are only paying the interest. Where there is a small niche market for these type of loans, they are not for everyone.

These type of loans are secured by the property that has been purchased. Although there is an option to pay more than the interest, this option is rarely taken. An interest only mortgage is popular due to the fact that it greatly reduces the monthly installment on the mortgage. However, these types of loans do have a bad reputation and are often made out to be high risk. Just like most types of mortgages, this type of property financing option does have both advantages and disadvantages and when used correctly under the right circumstances, can be highly rewarding.

How Does An Interest-Only Mortgage Work?

The principal loan amount is not taken into account when calculating monthly installments. Only the interest charged on the loan will need to be repaid on a monthly basis. For example:

A principle loan of $100,000 bearing 6.5% interest amortized over a 30 year period would result in a monthly repayment of $627 including both the principal and the the interest (P&I). The interest portion of this amount would be $541.50. This would result in a monthly saving of $85 when taking an interest-only loan.

Different Types Of Interest Only Mortgages

Most types of mortgages that provide an interest-only option do not have an unlimited term. In other words, you cannot continue to only pay the interest forever and after a specified period of time, the principal loan amount becomes fully amortized over the remaining term of the loan. For example, a 5/25 mortgage would allow for interest only payments for the first 5 years of the 30 year term and there after the principal loan amount will be amortized over the remaining 25 years of the original term when both interest and principal amount will form part of the monthly repayment.

To give you a better idea of how this works, look at these to popular options:

  • A 30 year mortgage with the option to pay only the 6.5% interest for the first 5 years on a principle loan amount of $200,000 will result in repayments of $1,083 per month for the first 5 years and $1,264 for the remaining 25 years of the term.
  • A 40 year mortgage with the option to pay only the 6.5% interest for the first 10 years on a principle loan amount of $200,000 allows for an interest-only payment in any chosen month within the initial 10 year period and thereafter, installments will be in the amount of $1,264 for the remaining 30 years of the term.

How To Calculate An Interest-Only Payment

It is easy to calculate interest on a mortgage:

  • Multiply the principal loan amount by the interest rate. In the above example, this would be $200,000 multiplied by 6.5 which is $13,000 in interest annually.
  • Divide the annual interest by 12 months and you arrive at your monthly interest payment on your mortgage. $13,000 divided by 12 equals $1083 which is what you will pay in interest on a monthly basis.

How Can You Benefit From A Interest Only Mortgage?

An interest-only loan is ideal for a first-time home buyer. Most new home buyers do not have the available income to afford to repay a conventional mortgage and therefore opt to rent rather than purchase.

The option to pay the interest-only in any given month provides the homeowner with some financial flexibility when it comes to unforeseen circumstances. In other words, the homeowner does not pay only the interest every month but can choose to do so when they need to during a month of financial difficulty or where an emergency has arisen that prevents them from making a full repayment.

Self-employed individuals or commission earners who do not earn a stable monthly income can also benefit from these type of loans. In high earning months, they can pay more towards the principal amount and in low income months, opt to pay only the interest on the mortgage.

What Does It Cost?

Due to the slightly higher risk that a loan provider may run in offering an interest only mortgage, these type of financing options are often a little more expensive than traditional mortgage options. Most often, the difference is as little as 0.5% in the interest charged on the principle amount.

Additional fees and charges may also apply as may a percentage of a point on the principal amount in order to grant the loan.

Misconceptions And Real Risks

The balance owed on the mortgage will never increase as it does with ARM loans. Increasing the balance is referred to as negative amortization and does not apply to interest-only mortgages.

The greatest risk is when it comes to selling a property which has not appreciated in value. If the principle amount has not been reduced due to paying interest-only, the loan amount will not have changed and therefore the full amount will become due. This will mean that the homeowner will run at a loss.

On the other hand, it is important to note that this is a risk that is run when taking out a conventional mortgage. It is rare that a loan will cover the costs of a selling a property that has not appreciated in value. A significant down-payment will reduce the this risk factor on an interest-only mortgage.

A drop in the property market can result in the loss of equity on the property. Once again, the risks associated with a decline in the property market is run by all homeowners whether they opt for an interest-only mortgage or a home loan that is fully amortized.

A Comprehensive Analysis Of USDA Loans In Texas

USDA loans are home buying mortgages that are backed by the U.S Department of Agriculture. They are also known as ‘Section 52’ loans or USDA Rural Development Guaranteed Housing Loans. These loans are offered to new and existing prospective home buyers to assist in the purchase of homes. USDA loans are highly available to all residents in the counties of Texas.

rural development loan programs in texas

These homes are offered to support prospective home buyers looking to acquire home owners in rural areas. Therefore, before applying for this loan, you should check to ascertain whether you are looking to acquire a home in an area that is considered to be a rural area. This should not worry you a lot since the USDA has very flexible descriptions on what area can be described as a ‘rural area’.

USDA Rural Development Loans loans give beneficiaries 100% financing for acquiring or building a home. These loans are typically given to low income earners.

In Texas, the average household income limit needed to acquire a USDA loan is $74,750. However, this limit can vary depending on the number of people in a household as well as the county in which you are applying for a loan.

In order to acquire a USDA loan, you must first meet the eligibility guidelines and the home that you want to acquire must also fall within the USDA housing limits. You can find out if your prospective dream home falls within communities eligible for USDA loans by visiting the U.S Department of Agriculture website.

If your home meets the eligibility standards, you can find a lender who offers USDA loans on the U.S. Department of Agriculture website. On finding a lender in your locality, they will guide you on how to know if you are eligible for a loan.

What Makes USDA Texas Housing Loans So Great?

If you have ever tried acquiring a house, you may have been asked to provide some form of down payment in order to get a mortgage from lending institutions. This is not the case when it comes to USDA housing loans. To get this loan, you do not need to put up any down payment. The loan offers full financing to beneficiaries.

There is also no limit to the amount that you can apply for in a USDA loan application in Texas. This means that these loans allow you to choose your dream home and offer full financial backing to make your house ownership dreams possible.

You also do not need to have any assets to offer as collateral when applying for a USDA loan. You simply need to meet the minimum application threshold to apply for a loan.

According to guidelines from the U.S Department of Agriculture, there is no minimum score to get a USDA loan. However, most lenders who are approved to offer these loans usually have a minimum credit score rating that you must meet to get this loan. In most counties in Texas, to get a USDA loan from an approved lender, you have to prove that you are credit worthy. However, this should not worry you as most USDA loan lenders have very flexible credit score requirements. In most counties in Texas, you simply need to have an average credit score of 620 to get a USDA housing loan.

You can also apply for a USDA loan whether you are looking to build your dream home from scratch or if you simply want to acquire an already existing property. This means that you can untether your imagination if you will be relying on a USDA loan to acquire a property. If you want to apply for a USDA loan, it also does not matter whether you are existing home owner. You can still apply for a USDA loan and get approval.

One of the reasons why most people tend to fear applying for housing mortgages from banks and other financial institutions is the high interest loan rates which can be changed by the lender at any time depending on market conditions. USDA loans are different in that they come with fixed repayment rates. These loans also have some of the lowest interest rates in the housing mortgage market.

USDA loans also have a very flexible and friendly repayment period. These loans can be repaid back over a period of either 15 or 30 years. This means that you can acquire a loan, buy or build your dream home and then make small repayments that will not get you in any financial constraints.

On acquiring a USDA housing loan, you can refinance your loan should mortgage housing rates fall. This means that you can save money through refinancing without having to verify your credit or income if you have a USDA loan. This is unlike other mortgage options where you have to verify both your current credit score and income.

On taking a USDA loan, if you cannot afford to pay the closing costs for a property, you can gift these costs to a member of your family or even other people that you are not related to. Your property seller can also pay for the closing costs of the property.

If you have a dilapidated property and want to make renovations to make your life easier and more convenient or even to sell your property, you can also apply and get a Texas USDA loan.

Top Pros and Cons of Texas USDA Loans


• You do not need to make a down payment when buying a property
• They have very flexible credit requirements
• They come at low and fixed interest rates
• They can be repaid over a period of over 15 or 30 years
• They are available to both new and existing home owners
• They can be refinanced


• Your application can be denied because of your income
• They are only available for people residing and looking to own homes in certain geographic locations in the United States
• USDA loans can only be used to build single family homes
• You cannot use USDA loans to build an investment property such as residential units
• They cannot be used to build a vacation home
• Your loan application can get denied by USDA lenders if you have a credit score that is extremely low

If you are looking to build a new home, acquire an existing property or make home improvements in your residence, you should consider acquire a Texas USDA loan. Among all the housing mortgage options available in the market, you are highly unlikely to find one that is better than the USDA.

Various Factors Which Affect Your USDA Loans Texas Income Limits

If you didn’t already know, you may be able to qualify for a USDA home loan. USDA loans were designed with potential home owners in mind. However, it was crafted to facilitate those who had a pretty modest income each month. Read on as we dive deeper into USDA loans Texas income limits.

usda income limit

In order to get the process started, lenders are required to ensure that the income of an applicant’s household is guaranteed and it must not exceed the limit for that particular area. Simply put, if the income of the applicant is below or exactly at the required limit for their designated area and they can afford to successfully repay the loan, there’s a high possibility that they now meet the requirements to secure a USDA loan. Most persons typically think that there is a limit to what type of home they can afford since the program was designed to aid with low to medium incomes.

However, this is not close to being accurate and the USDA hasn’t put any restrictions on the loan limits. Instead, the maximum loan amount is rather determined on the qualification ability of the borrower.

USDA Loans Texas Income Limits

The limits experienced are different for a household’s size as well as the location and they are also dependent on the base income for the U.S. The income limits increased on the 22nd of July 2019 for Single-Family Housing Grants. However, before this occurred, the limit for a house that had up to 4 persons was that of $82700 and it was $109150 for a house which contained between 5 and 8 persons.

USDA base income limits are as follows:

*1 to 4 persons – $86850
*5 to 8 persons – $114650

Depending on the number of members of each household, the limit changes. For those living in countries where the cost of living is high, the expected income is also expected to be higher than those who live in a country where it is significantly less. In order to illustrate we’ll use the following example:

*Homebuyers within Irvine, CA have a limit of $125700 for up to 4 persons and $165900 for a household of 5 to 8.

In the case where there is more than eight persons, the applicant qualifies to get up to eight percent of the limit that is granted for 4 persons for every additional member. If you’ve got a series of questions which are focused on whether you qualify or not, it’s a great idea to ensure that you find a reputable USDA lender that is focused on you during every step of the process.

What Is The Qualifying Income For A USDA Loan?

As we’ve mentioned previously, the USDA focuses on your annual household income. This gives them a limit to work with and it also considers the expected figure for the upcoming year. Hence, the total is simply the income received by the potential applicant as well as all the other working adults within the home. This still serves valid even in cases where the other members are not associated with the loan.

So, if there is an applicant who shares a home with his spouse and his adult brother, the total annual wage from all three are therefore included within the loan calculations.

How Is The Income Calculated For A USDA Loan?

A required household projected income is calculated by the lenders for the upcoming 12 months. This is done based on all the available historical data and it includes the current pay stubs as well as W2s. However, the USDA has set their income limit and it determined before deductions are made from the payroll. The gross income is basically a representation of any bonuses, salary, tips, commission, overtime and even service compensation; it can also include living allowances cost or even the housing allowance received.

If you reside within a household where a member is a farmer or they own a small business, there is now the application of net income of operations. Additionally, lenders also have their own specific guidelines which revolve around employment and income.

What About Income That Isn’t Counted?

Just like anything else, there are some exceptions which are provided by the USDA. The following are exceptions to the rules and should never be counted towards the maximum USDA income limits before and after taxes:

*An income that is earned from a minor.
*The income of an adult student who is enrolled full time in a school and has an excess of $480.
*Payments that come from housing assistance.
*The income of a live-in nurse or other live-in aides.
*Additions to assets that exist in a lump sum like that of life insurance policies, inheritance and capital gains.

Additionally, there are various other instances where the income from a particular source doesn’t count towards the potential loan limit. In essence, lenders will also take into consideration a series of different aspects which contribute to your repayment income. These are usually different and are not related to the USDA income limit eligibility.

Maximum USDA Loans Texas Income Limits

As we’ve previously mentioned, there is no limit to the type of home any home owner can buy. As such, the USDA doesn’t ever set a limit on a loan such as FHA loans. The maximum amount which can be borrowed from a lender is based on the qualification ability of the borrower.

Since there is no limit to a USDA guaranteed loan, you’re going to be pre-approved on some of the following factors:

*Income and debt
*Credit score
*Savings and assets
*Mortgage or previous rental payment history

As we conclude, we have just looked at USDA loans Texas income limits. We have also looked at the various factors which affect the limit of the loan that you’re seeking to get. So, remember if you’re interested in getting a USDA loan, it all depends on the total income of the persons living in your household and it also depends on the number of persons. If you’re interested in finding out more about the USDA income requirement, be sure to contact a loan specialist!