Title Seasoning Requirements
What Are Title Seasoning Requirements And How Do They Affect Real Estate?
Seasoning Requirements related to Title Seasoning. After the real estate boom burst it was discovered that mortgage and other real estate fraud was rampant. To curb some of this FHA and various lenders and government agencies and institutions placed Title Seasoning Requirements in their guidelines for providing loans. This means that you may be required to hold title to a property for a period of time before a FHA backed loan can be used to finance the property. Typically this was for 90 or 180 days and the goal was to curb or cause the flipping of property to be more difficult. The effects however are that properties remain vacant since they cannot be bought, rehabbed and sold in a manner that is profitable to an honest flipper. Generally properties that are flipped are bought with cash or short term financing. The flipper needs to be in and out of the property generally in 30/45 days. Requiring that the property be held for 60-90-180 days in the original owners name before a retail buyer can obtain a mortgage increases carrying costs and lowers profitability. As a result the seasoning requirements are always being changed and waived so check with your real estate agent or mortgage professional as to what the current FHA or other title seasoning requirements are in place before you buy a property as a flip.
Title seasoning requirements can also negatively affect those who aren't flippers. Many real estate investors who buy, hold and rent out property purchase with cash or expensive short term financing. They then expect to put a standard mortgage on the property once it is rent ready and a tenant in place. By requiring these investors to hold the more expensive financing or leave their cash hostage it negatively affects their ability to buy, fix and rent homes.