FHA 90-Day Flip Rule Exemptions and How to Navigate Them

The FHA anti-flipping rule (HUD Handbook 4000.1, Section II.A.1.b.ii) restricts FHA financing on properties that were acquired and resold in a short time frame. Understanding the exemptions prevents unnecessary deal failures.

The 90-Day Rule Explained

FHA will not insure a mortgage on a property that was acquired by the current seller in the prior 90 days (measured from the seller's deed recording date to the new purchase contract execution date). The purpose is to prevent predatory flipping schemes where a seller acquires a distressed property, makes minimal or fraudulent improvements, and sells it to an FHA buyer at an inflated price. The rule applies to the seller's acquisition date, not the listing date.

Transactions Exempt From the 90-Day Rule

• ✦Sales by HUD (REO): when HUD itself is the seller of an FHA-acquired property, the anti-flipping rule does not apply
• ✦Sales by other federal agencies (GSE, VA, USDA, state housing agencies): same exemption as HUD REO
• ✦Sales of newly constructed homes: a builder selling a newly built home is not subject to the 90-day seasoning requirement
• ✦Sales by employers or relocation companies: employer-assisted housing programs and corporate relocation lender sales are exempt
• ✦Inherited properties: a seller who acquired the property through inheritance is exempt from the 90-day requirement
• ✦Sales in Presidentially declared disaster areas: temporary exemptions may be issued to facilitate property disposition after a disaster

The 91-to-180 Day Window

Properties resold between 91 and 180 days from the seller's acquisition date are eligible for FHA financing but face additional scrutiny if the resale price is 100% or more above the seller's acquisition price. In those cases, FHA requires a second appraisal by a different FHA-approved appraiser paid for by the lender (not the borrower) and a re-inspection if the first appraisal conditions warrant it. The second appraisal requirement protects against inflated value scenarios while allowing legitimate renovations to be captured in the resale price.