Financing · Regulation Z, 12 CFR 1026.35Second appraisal on a flipped house: the higher-priced mortgage loan rule
Federal Truth in Lending rules add a check on fast resales when the buyer's loan is a higher-priced mortgage loan (HPML) – a first-lien loan on the buyer's principal dwelling whose APR is 1.5 or more percentage points above the average prime offer rate (2.5 for jumbo loans) when the rate is set (§1026.35(a)(1)). For such a loan to buy a principal dwelling, the lender must get two written appraisals before closing if the seller acquired the property 90 or fewer days before the buyer's contract and the price is more than 10% above the seller's purchase price, or 91 to 180 days before and more than 20% above (§1026.35(c)(4)(i)). The appraisals must be by different appraisers; one must analyze the price difference, market changes and improvements since the seller bought; and the buyer can be charged for only one of them. Exempt sellers include government agencies, lenders selling foreclosures, heirs and divorcing owners, relocation companies, deployed servicemembers, and homes in rural counties or certain disaster areas.
When two appraisals are required (§1026.35(c)(4)(i))
Higher-priced loan
APR at least 1.5 points over the average prime offer rate (first lien, conforming size); 2.5 for jumbo.
Resale in 90 days
Seller acquired 90 or fewer days before the buyer's contract and the price is more than 10% higher.
Resale in 91–180 days
Seller acquired 91 to 180 days before and the price is more than 20% higher.
Principal dwelling purchase
The rule applies to financing the purchase of the buyer's principal dwelling.
How the two appraisals work
- Two different certified or licensed appraisers.
- One analyzes the price difference, market changes and any improvements since the seller acquired the home.
- The buyer may be charged for only one of the two appraisals.
- The lender relies on written documents to find the prior sale date and price; if it cannot, it orders both.
Exempt purchases (§1026.35(c)(4)(vii))
- From a government agency, or a lender or noteholder that took title by foreclosure or deed in lieu.
- From a nonprofit in a government foreclosure-resale program.
- From an heir, or a seller under a divorce or partition order.
- From an employer or relocation agency, or a servicemember with deployment or PCS orders.
- Homes in a rural county, or in a federal disaster area while the appraisal rules are waived.
Questions agents and buyers ask
Why does my lender need two appraisals on a flipped house?
If your loan is a higher-priced mortgage loan and the seller bought the home within 180 days at a much lower price (more than 10% within 90 days, more than 20% within 91–180 days), Regulation Z requires two appraisals (12 CFR 1026.35(c)(4)).
Who pays for the second appraisal?
The lender may charge the buyer for only one of the two required appraisals (12 CFR 1026.35(c)(4)(v)).
How is this different from the FHA 90-day rule?
FHA bars FHA financing on resales within 90 days of the seller's acquisition (24 CFR 203.37a); the HPML rule applies to higher-priced loans of any type and requires a second appraisal instead.
Related guides
On a flip, add both appraisal dates as deadlines in ClosingCode – the appraisal contingency and the financing deadline stay in view next to them.
Start free trialSource: 12 CFR 1026.35(a)(1) and (c)(4) (Regulation Z), eCFR, read October 25, 2026.
General information, not legal or financial advice. Whether a loan is higher-priced depends on its APR when the rate is set; the lender decides. ClosingCode is software; it is not a lender. This guide is not a substitute for the advice or services of an attorney.