Can You Get a Second FHA Loan? Everything You Need to Know

The FHA loan program allows borrowers to purchase a home with less money down and more flexible credit standards than conventional loans. But if you already have an FHA loan can you get a second one? Generally the answer is no—with some exceptions.

The Federal Housing Administration (FHA) insures FHA loans, which are popular options for first-time homebuyers and buyers with lower credit scores. An FHA loan requires just a 3.5% down payment if your credit score is 580 or higher.

However, FHA guidelines state that you can only have one FHA loan at a time in most cases. This rule aims to prevent borrowers from using FHA financing to buy multiple investment properties

While you can get multiple FHA loans over your lifetime, there are only a few special circumstances where you can have two FHA mortgages simultaneously. Let’s explore the details so you understand when and how you may qualify for a second FHA loan.

FHA Loan Overview

Before diving into the specifics on second FHA loans, let’s do a quick review of how these government-backed mortgages work:

• Down payment: Only 3.5% required if your credit score is 580+ (10% down required for scores 500-579)
• Credit score: Minimum of 580 required, with options for borrowers with scores as low as 500
• Debt-to-income ratio: Typically 43% or lower
• Mortgage insurance: Required (can be rolled into loan amount)
• Usage: For primary residences only in most cases

FHA loans offer more flexible qualifying guidelines than conventional mortgages. However, they limit you to one loan at a time because they are intended for owner-occupied homes, not investment properties.

When Can You Get an Additional FHA Loan?

Although rare, there are a handful of exceptions that allow you to qualify for a second FHA mortgage if you already have one.

You’re Relocating for a New Job

If your new job requires you to relocate beyond a reasonable daily commute from your current home, FHA guidelines may permit you to take out a second loan before selling your original property.

You’ll need to provide documentation verifying your new employment and showing that your old home is now too far away to serve as your primary residence.

Your Family Size Has Increased

If you’ve had a new baby or adopted a child and your current FHA-financed home no longer meets your larger family’s needs, you may also qualify for a second FHA loan.

You’ll have to submit official documentation like a birth certificate or adoption papers as evidence that your family has grown.

You’re Going Through a Divorce

FHA loans allow for a second mortgage if you’re moving out of a home you co-owned with an ex-spouse. For example, if your divorce settlement allows your former partner to stay in the house you purchased together with an FHA loan, you may be able to get approved for a new FHA mortgage on your own.

To qualify in this situation, you’ll need to provide your final divorce decree paperwork.

You Have Significant Home Equity

If you have at least 25% equity built up in your current FHA-financed property, FHA guidelines may permit you to take out a second loan before paying off the first.

You can also potentially qualify if you pay down your existing FHA mortgage balance to 75% of the home’s value. Showing substantial equity minimizes the risk for the lender.

You’re Co-Signing for a Family Member

Co-signing an FHA mortgage with a family member who will be the primary occupant can represent another exception to having just one FHA loan.

However, remember that co-signing makes you equally responsible for the debt. If your relative can’t pay, you’ll be on the hook for making those mortgage payments.

How to Qualify for Two FHA Loans

If one of the above exceptions fits your situation, you still must prove you can handle two mortgage payments to get approved for a second FHA loan.

Here are key requirements to qualify:

• FICO credit score: 580 minimum in most cases
• Down payment: 3.5% of purchase price (10% if score is 500-579)
• Debt-to-income ratio: Typically 43% or lower
• Savings: Enough cash to cover your down payment, closing costs, and a few months of mortgage payments

Meeting standard FHA loan requirements is a must. But lenders will also scrutinize your income and debt level more carefully when you apply for two mortgages.

They want to ensure your debt-to-income ratio won’t be excessive and that you can comfortably handle both payments. Expect to provide ample documentation of your income and assets.

The lender may ask for bank statements showing you have cash reserves. This demonstrates your ability to pay both mortgages if you face temporary financial hardship like a job loss or disability.

Alternatives if You Don’t Qualify for Two FHA Loans

If you don’t meet the exceptions or mortgage qualifications to take on a second FHA loan, you have alternatives:

• Sell your current home: You can’t have two FHA loans simultaneously in most cases. Selling your current property and paying off the loan may be necessary to purchase another home with FHA financing.

• Rent instead: The income and debt obligations of two mortgages may be too much for some borrowers. Renting while trying to sell your existing home may make sense.

• Refinance to a conventional loan: If you have sufficient income and equity, you may be able to refinance your current FHA mortgage to a conventional loan and free yourself up to qualify for a new FHA mortgage.

• Other low down payment mortgages: Explore options like Fannie Mae HomeReady or Freddie Mac Home Possible loans if you don’t have 20% to put down but want alternatives to a second FHA loan.

The Bottom Line

While permissible in certain scenarios, qualifying for two FHA loans at the same time is difficult. Some homeowners may find it more practical to refinance their current FHA mortgage and tap home equity before pursuing additional financing.

But for eligible borrowers who understand the risks and meet all requirements, a second FHA loan can offer a path to purchasing another primary residence without needing to come up with a large down payment.