The FHA Flip Rule

FHA loans are one of the most common financing tools for first-time homebuyers. Backed by the Federal Housing Administration, they allow for lower down payments and more flexible credit score requirements than conventional loans. For many, an FHA loan is what makes the dream of homeownership possible.

However, because these loans are government-backed, they come with additional guidelines. Some of these requirements protect the homeowner by ensuring the property is safe, sound, and fairly valued. Others, like the FHA Flip Rule, are designed to protect borrowers from predatory practices in the real estate market.

Understanding the FHA Flip Rule is important for homebuyers, sellers, and real estate agents. Failing to account for it can result in frustrating delays—or even a deal falling apart.

At CapCenter, our real estate and mortgage teams work side by side to help clients navigate these rules with confidence, so you don’t run into surprises late in the process.

What is Property Flipping?

Property flipping is the practice of buying a home, making improvements, and reselling it quickly for a profit. There is nothing inherently wrong with this approach—most homeowners want to add value to their property. The difference is that flipping typically happens within a very short timeline.

Flipping surged in popularity during the early 2000s housing boom. Television shows glamorized the process, and investors jumped at the chance to capitalize on undervalued homes. But not every flipper was concerned with quality. Many cut corners, ignored building codes, or even engaged in fraudulent practices such as inflating property values.

The result? Some FHA buyers ended up with overpriced homes that required major repairs. To prevent this, the FHA implemented the Flip Rule in 2003 to protect borrowers and ensure homes financed through FHA loans are safe, fairly priced, and not the product of predatory flipping.

The FHA Flip Rule Explained

The FHA Flip Rule has two main parts, both of which focus on how long a seller has owned a property before reselling it to an FHA buyer.

Part 1: The 90-Day Rule

The first part is simple: FHA financing cannot be used if the seller has owned the property for fewer than 90 days.

This means if a seller bought a home on April 1, the earliest date a buyer using an FHA loan could go under contract is July 1 (day 91). Any offer accepted before that date would not be eligible for FHA financing.

This rule was designed to prevent “quick flips” that often masked poor-quality renovations.

Part 2: The 91–180 Day Rule

The second part comes into play once the 90 days have passed. If a property is resold between days 91 and 180—and the resale price is 100% or more higher than what the seller originally paid—the FHA requires additional safeguards.

Specifically, the lender must order a second appraisal. If that second appraisal comes in more than 5% lower than the first, the lender must use the lower of the two values when processing the loan.

For example, let’s say a seller purchased a home on April 1 for $100,000, completed major renovations, and listed the property for $205,000. The earliest FHA contract date would be July 1. But because the new price is more than double the acquisition price, any FHA buyer who writes a contract between July 1 and September 28 (days 91–180) would trigger the requirement for two appraisals.

This second appraisal requirement helps prevent inflated values from being pushed onto unsuspecting buyers.

Exceptions to the FHA Flip Rule

While the rule is strict, there are a few exceptions:

• Inherited properties – If the seller acquired the home through inheritance.
• New construction – If the prior transfer was the builder’s purchase of the lot.
• Government sales – Properties sold by HUD, Fannie Mae, Freddie Mac, or other approved agencies.
• Non-profits – Certain HUD-approved non-profit organizations are exempt.
• Disaster areas – Homes located in areas declared major disaster zones by the President.

In these scenarios, the 90-day waiting period may not apply.

Why the FHA Flip Rule Matters

The FHA Flip Rule is easy to overlook, especially since conventional and VA loans do not have similar restrictions. Too often, it’s not caught until late in the process—usually when the appraiser reviews the title history.

By that point, buyers may have already spent money on inspections and appraisals, only to find out the deal cannot proceed. This can delay closing or even cause the contract to fall apart entirely.

For buyers using FHA loans, it’s crucial to check when the seller acquired the property before submitting an offer. For real estate agents, it’s an important due diligence step to protect your clients and avoid surprises.

Criticism of the FHA Flip Rule

The rule is not without its critics. Some argue that it unnecessarily slows down the housing market by restricting how quickly renovated properties can be sold. Others claim it makes it harder for FHA buyers to access move-in-ready homes in competitive markets.

Still, the FHA stands by the rule as a consumer protection measure. By requiring seasoning periods and additional appraisals, the program reduces the risk of inflated pricing and ensures buyers are making sound financial decisions.

CapCenter: A Trusted Partner in FHA Lending

At CapCenter, we know that FHA loans often make homeownership possible for buyers who might otherwise be priced out. That’s why we make it a priority to help our clients fully understand the rules that come with them—including the FHA Flip Rule.

Our full-service team of agents and loan officers works together to catch potential FHA issues early, so you don’t waste time or money pursuing a property that isn’t eligible. And with CapCenter’s Zero Closing Cost loans, you’ll save thousands at the closing table compared to traditional lenders.

Whether you’re a first-time buyer or planning to move into your next home, CapCenter is here to simplify the process, protect your investment, and help you achieve your goals.

Explore CapCenter’s FHA loan options or connect with us today to get started.

FAQs About the FHA Flip Rule

Can I buy a flipped house with an FHA loan?
Yes, as long as the seller has owned the home for at least 90 days. If the home is being resold between days 91–180 for more than double the original purchase price, a second appraisal is required.

Do VA or conventional loans have a flip rule?
No. The FHA flip rule is unique to FHA loans.

Does the FHA flip rule apply to cash buyers?
No. It only applies to FHA-insured loans.

How do I know if a property qualifies under FHA rules?
Your real estate agent and lender should review the property’s history before you make an offer. Working with a team experienced in FHA loans, like CapCenter, can prevent surprises.

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