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Property Flipping
- Property flipping involves purchasing property, increasing its value, and reselling it within a short period.
- Real estate investors use fix and flip loans for purchasing, improving, and selling properties for profit. These loans consist of purchase funds and rehab funds.
- FHA Rules: FHA-insured mortgages cannot fund purchases of homes flipped within 90 days. Sellers must own properties for at least 90 days before selling to FHA borrowers.
Loan Flipping
- Loan flipping involves refinancing mortgages with high fees to strip equity from a home, often leading to increased debt for borrowers.
- Lenders in loan flipping encourage repeat refinancing, which generates fees and costs that can trap borrowers with higher payments if rates rise.
Types of Mortgages
- Flip Mortgages: These renovation mortgages fund investors who buy and quickly resell renovated properties for profit with short terms, usually under one year.
- Wraparound Mortgages: A type of seller financing that leaves original mortgages in place, often used on difficult deals.
