Good news for buyers! The Department of Housing and Urban Development (HUD) announced on Friday the 15th, that it is waiving the rule which makes a property ineligible for FHA financing if it was bought within the last 90 days.

Secretary  Shaun Donovan of  HUD said, “As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential home buyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many home buyers find affordable housing while contributing to neighborhood stabilization.”

The new rule will take effect February 1,2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA commissioner. The rule was first brought about to protect FHA borrowers against predatory practices of “flipping” where properties were quickly resold at inflated prices.  In todays market of over-regulation and extra underwriting of appraisals, it would be hard to over inflated homes prices.  The inflated prices are a thing of the past, for now.

The following conditions must be meet on the transaction:

•All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

•In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.

•The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website here.