How Soon Can You Get Another FHA Loan?

The Federal Housing Administration’s (FHA) mortgage insurance program makes it easier for buyers with lower credit scores or limited funds saved for a down payment to qualify for a home loan. FHA loans only require a 3.5% down payment if your credit score is 580 or higher. But if you already have an FHA loan and want to buy another home, you may be wondering how soon you can qualify for a second FHA mortgage.

Overview of FHA Loan Rules

In most cases FHA guidelines only allow you to have one FHA loan at a time. This prevents buyers from using FHA financing – which has easier underwriting standards than conventional mortgages – to purchase multiple investment properties.

However, there are a few exceptions that give homeowners some flexibility:

• You can qualify for a second FHA loan if you’re relocating for a new job or transferring to a duty station more than 100 miles away from your current home

• If you receive a FHA-financed home in a divorce settlement, your ex-spouse stays in the home, and you want to buy another house, FHA may approve a second loan.

• You can also be added as a co-borrower to someone else’s FHA loan and still qualify for your own FHA mortgage later on.

• If you need to upsize to accommodate a larger family, you may be able to get another FHA loan. But you’ll need at least 25% equity in your current home.

• There is no waiting period between FHA loans as long as you meet one of the exceptions.

So when can you get another FHA mortgage if you already have one? Essentially, as soon as you fit one of the above categories that makes an exception to the one FHA loan at a time rule.

Detailed FHA Guidelines on Multiple Loans

To understand exactly when and how you can qualify for another FHA mortgage, let’s take a closer look at the FHA guidelines around multiple loans.

Exception for Relocation

FHA allows you to have two loans at the same time when you’re relocating for a new job opportunity. Specifically, you must be:

• Relocating outside of your current area.
• Moving somewhere that makes your commute unreasonable.
• Transferring to an area where affordable rental housing does not exist.

In this situation, FHA understands you may need to purchase another home before selling your current one.

Exception for Divorce

If you and your spouse divorce, and your ex retains ownership of your FHA-financed home, FHA allows you to purchase a new house with FHA financing.

Your lender just needs documentation to verify the home was awarded to your ex-spouse through the divorce decree.

Exception for Cosigning

Let’s say you cosigned on an FHA loan to help out a family member or friend, but you aren’t actually on the title for that property. In that case, you can still qualify for your own FHA mortgage later on.

The cosigned FHA loan will count against you when the lender calculates your debt-to-income ratio. But it won’t disqualify you from getting your own FHA loan.

On the other hand, if you already have an FHA loan in your name and then want to become a co-borrower on someone else’s FHA mortgage, you may need to make at least a 25% down payment on the second home.

Exception for Family Size Increase

If your family grows substantially, requiring a larger home, FHA may approve a second loan. To qualify under this exception, you must:

• Show documentation proving the increase in dependents, such as birth certificates.

• Provide evidence your current home no longer meets your needs.

• Have at least 25% equity in your current FHA property.

If you don’t yet have 25% equity, you can get there by paying down your loan balance. Once you reach 25% equity, you can qualify for the second FHA loan.

No Waiting Period Required

Unlike other mortgage programs, FHA does not make you wait a certain amount of time between loans. As long as you qualify under one of the exceptions, you can get approved for another FHA loan right away after closing on your current mortgage.

For instance, if you get a job relocation offer two months after purchasing your first home with an FHA loan, you wouldn’t have to wait. You could immediately apply for a second FHA mortgage.

Qualifying for Multiple FHA Loans

To qualify for multiple FHA loans, you must meet all the standard FHA loan requirements:

• Credit score: At least 580 for 3.5% down or 500-579 for 10% down

• Down payment: 3.5% of purchase price or 10% depending on credit score

• Debt-to-income ratio: Below 43% for all your monthly debt payments

In addition, the lender will look closely at whether you can afford all your housing payments. When applying for the second FHA loan, be prepared to provide:

• Lease agreements and rent receipts showing at least 12 months of rental history on the initial FHA property.

• Documentation verifying any home improvements made on the initial FHA property.

• An appraisal or tax assessments showing the current value of the initial FHA property.

Providing this documentation allows the lender to accurately calculate your total monthly mortgage payments. It helps them feel confident you can handle both loans.

Meeting the exceptions and regular qualification requirements is key to getting approved for multiple FHA mortgages.

Alternatives to Multiple FHA Loans

Although FHA allows more than one loan in certain situations, taking out several mortgages can be complicated. You have to keep each home as your primary residence for at least a year before renting it out or selling it. And managing payments on multiple mortgages eats into your finances.

Here are a few alternatives to consider:

Conventional 97: This conventional mortgage option lets you put down just 3% like an FHA loan. But it avoids ongoing mortgage insurance payments. If you have good credit and some funds saved, it may be a better choice than multiple FHA loans.

Down payment assistance: Many state and local governments offer down payment assistance grants and loans. These programs can help first-time buyers cover the down payment on their first home. Then you may be able to qualify for a conventional or USDA mortgage later on.

Home equity loan: If you have sufficient equity in your current home, a home equity loan or line of credit can provide funds to purchase a second property. You can rent out the FHA home and use the rental income to cover payments on both mortgages.

Sell first: Rather than keeping your initial FHA property and rolling the equity into a new home loan, you could just sell your current house first. Work with a real estate agent to list your home at a competitive price right away. This avoids having two big mortgage payments each month.

Looking at these alternatives can help you decide if getting multiple FHA loans is truly the right move for your situation.

The Bottom Line

Although uncommon, FHA does make exceptions for borrowers who need more than one FHA loan at the same time. Just be aware you must live in each FHA-financed property for at least 12 months. And qualify under one of the exceptions like relocation or divorce.

Once you meet one of the exceptions, you can get approved for another FHA mortgage right away. There is no required waiting period. But think carefully before taking on multiple loans. It often makes more financial sense to explore options like down payment assistance programs, home equity loans, or selling your current house first.