Can You Get an FHA Loan Twice? What Borrowers Need to Know

Getting an FHA loan can be a great way for many borrowers to achieve homeownership. With low down payments and flexible credit requirements FHA loans open the door to buying a home for those who may not qualify for other types of mortgages.

But what if you already have an FHA loan and want to buy another home – can you get approved for a second FHA loan? Or are you limited to only using the FHA loan program once?

As a borrower, it’s an important question to understand. The rules surrounding multiple FHA loans are often confusing. In this article, we’ll break down the key facts on whether or not you can get an FHA loan twice.

The Short Answer – Yes, You Can Get Multiple FHA Loans

The short answer is – yes, you are able to get more than one FHA loan in your lifetime.

The FHA loan program does not limit borrowers to just a single loan. So if you’ve had an FHA loan in the past to purchase your current home you can get another FHA loan in the future for a new home.

However, there are some specific requirements around having multiple FHA loans at the same time. We’ll cover those details next.

FHA Guidelines On Multiple Loans

As we mentioned above, you can absolutely get approved for multiple FHA loans over your lifetime as a borrower. But there are some limitations on having multiple FHA loans open simultaneously.

The General Rule – Only One FHA Loan at a Time

The general rule set by FHA guidelines is that borrowers may only have one FHA-insured mortgage at any given time.

This policy is in place to prevent borrowers from using FHA loans to buy multiple investment properties or vacation homes. The intent of the FHA loan program is to help borrowers purchase primary residences.

So if you currently have an FHA loan and are looking to buy a new primary home, you would need to sell your current home or refinance into a conventional loan before getting a new FHA mortgage.

Exceptions That Allow Multiple FHA Loans

However, FHA guidelines do provide for some exceptions where borrowers can qualify for a second FHA loan while still holding an existing one.

According to the FHA handbook, exceptions are allowed in situations such as:

• Relocating for a new job: If you need to move for employment and your new location is not within reasonable daily commuting distance from your current home.

• Leaving a jointly-owned property: When a borrower is vacating a jointly-owned residence, such as in a divorce, and the other co-owner will remain in the home.

• Cosigned for someone else’s loan: If you cosigned on an FHA loan to help someone else buy their home, and now need to purchase your own place.

• Accommodating family growth: Borrowers may be eligible for a second FHA loan if they can demonstrate their current home no longer meets the needs of their growing household.

In these exception cases, borrowers may qualify to have two active FHA loans for a limited time. Specific documentation and eligibility requirements must be met when applying under these exceptions.

No Waiting Period Between Loans

When applying for a new FHA loan, there is no required waiting period after having a previous FHA mortgage. As long as you meet current FHA borrowing requirements and guidelines, you can get approved even if your last FHA loan was recent.

This differs from other mortgage programs like VA loans which require a set waiting period between uses of the benefit.

FHA Loan Requirements Stay the Same

Because FHA insures the mortgage, they want to ensure borrowers getting a subsequent loan are still a safe risk. This means meeting the same FHA eligibility standards as any borrower.

When applying for your second or third FHA loan, you still need to meet all the current requirements. This includes:

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

• Debt-to-income ratio: Overall debt levels under 43% of gross income. Can go up to 50% with compensating factors.

• Downpayment: At least 3.5% from your own funds. Gifts can be used for remaining amount.

• Mortgage insurance: Required on all FHA loans for life of the loan.

• Loan limits: Vary by metro area, typically between $420,680 to $970,800 depending on local home prices.

• Foreclosure waiting period: At least 3 years since last foreclosure.

• Documentation: Full income and asset verification required.

As long as you meet all the standard FHA eligibility criteria, you can be approved for another FHA mortgage. Your previous FHA loan does not affect the requirements.

However, having a history of good mortgage payments on your earlier FHA loan can help strengthen your application.

Tips for Getting a Second FHA Mortgage

If you’re considering applying for another FHA loan, here are some tips to help make the process go smoothly:

• Check your credit report and scores to address any issues early. Having scores of at least 680 can improve your chances.

• Pay down debts to keep your DTI below 43% if possible. The lower the better for approval odds.

• Save up your downpayment amount from your own funds rather than gifts.

• Gather all required documentation on income, assets, and employment.

• Explain your specific reason for needing the second FHA loan to show it meets guidelines.

• Be ready to wait for your first FHA mortgage to be paid off before closing on the second.

• Shop with multiple lenders to compare interest rates and costs. Credit unions often have good FHA loan options.

• Ask lenders upfront if they have experience with approving borrowers for multiple FHA mortgages.

With proper preparation and an understanding of the rules around multiple loans, getting a second FHA mortgage is definitely possible for eligible borrowers.

The Bottom Line

The bottom line is that FHA guidelines do allow borrowers to obtain more than one FHA loan over their lifetime. There is no limit set on the number of times you can use the program.

However, there are restrictions around having multiple FHA mortgages open at the same time. In most cases, you can only have one active FHA loan in your name.

Exceptions are made when the second loan is needed for specific reasons like relocating for employment or leaving a jointly-owned home.

As long as you qualify under regular FHA requirements, you can get approved for another FHA mortgage after paying off your current one. This flexibility makes FHA an accessible option for repeat buyers.

So for homebuyers interested in tapping into the FHA program more than once, it is possible with proper planning and preparation.