If a borrower is purchasing a home with an FHA loan and the home requires Flood Insurance, what is the length of the rescission period after closing?

For a borrower purchasing a home with an FHA loan that requires Flood Insurance, there is actually no rescission period applicable. This is because the rescission period—a time frame during which a borrower can cancel a loan after closing—typically applies to refinance loans, not to purchase loans. When an FHA loan is involved, and especially when flood insurance is a requirement, the rules indicate that the borrower is committed at closing, with immediate obligations under the terms of the loan.

In this specific context, the absence of a rescission period aligns with federal regulations establishing that purchase transactions differ from refinancing scenarios. The rationale is to provide certainty to both the lender and the borrower in these purchase agreements, particularly when flood insurance is involved, as it protects both parties from potential losses.