Buying a home is an exciting milestone in life. For many their first home purchase is made possible through an FHA loan. With low down payments, flexible credit requirements, and low interest rates FHA loans offer an affordable path to homeownership.
As your life and needs change, you may consider purchasing additional properties as primary residences or investments. This raises an important question – can you have 2 FHA loans at the same time?
The short answer is maybe, but with limitations. While the FHA does allow borrowers to hold multiple mortgages backed by the agency, strict occupancy rules apply. Let’s break down when and how you can qualify for 2 FHA loans.
FHA Loan Basics
First a quick primer on how FHA loans work. FHA loans are government-insured mortgages issued by FHA approved lenders. Borrowers pay an upfront and annual mortgage insurance premium in exchange for low down payments.
Here are some key features of FHA loans:
- Low Down Payments – Only 3.5% down required for credit scores 580+
- Lenient Credit Guidelines – Minimum 580 credit score required
- Low Mortgage Insurance – Upfront 1.75% fee plus 0.45% – 1.05% annual premium
- Fixed Interest Rates – Most lenders offer 15 and 30 year fixed rate terms
While FHA loans offer flexibility they do come with a key condition – they are intended only for owner-occupied primary residences. Investment properties are not eligible. This becomes important when looking at guidelines for multiple loans.
When Can You Have 2 FHA Loans?
In most cases, you can only have 1 FHA loan at a time. This prevents investors from using FHA financing on multiple rental properties.
However, FHA guidelines do provide a few exceptions where you can hold 2 FHA mortgages simultaneously:
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Relocation – If you get a new job in a different area, you can qualify for a second FHA loan before selling your current home. Your new residence must be at least 100 miles away.
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Increase in family size – FHA allows a second loan if your family has grown larger and your current home no longer meets your needs. You’ll need to show 25% equity in the current property.
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Divorce – In case of divorce, the spouse staying in the home can take over the existing FHA mortgage. The departing spouse can qualify for a new FHA loan on a different property.
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Co-signing – You can co-sign on an FHA loan for a family member while still holding your existing mortgage. Both loans would be valid.
In each case, occupancy rules must still be met, with at least one home remaining your primary residence. Investment properties are not eligible.
How to Qualify for 2 FHA Loans
Meeting FHA guidelines for a second mortgage takes careful planning and preparation. Here are key steps:
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Check your credit – Confirm your credit score is at least 580, the minimum for an FHA mortgage. Pay down balances and correct errors to maximize your score.
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Lower your DTI – Your total debt-to-income ratio must remain below 43% when accounting for both mortgage payments. Pay off credit cards, auto loans, and other debts.
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Save for a down payment – FHA requires at least 3.5% down if your credit score is 580+. Budget and save the necessary funds.
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Build home equity – For a larger family home, you’ll need 25% equity in your current property. Make extra mortgage payments to reach this threshold.
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Document occupancy – Get paperwork in order to validate it’s your primary residence, such as bills and bank statements.
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Compare mortgage lenders – Shop around with multiple lenders to find the best rates and close on your second FHA loan.
Alternatives to 2 FHA Loans
If getting approved for two FHA mortgages won’t work, you still have options:
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Conventional 97 Loan – Allows 3% down payment on primary residence without mortgage insurance.
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Cash-out Refinance – Take equity out of current home to use as down payment on new property.
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Sell First Home – Use proceeds to pay off existing FHA loan and fund down payment on new home.
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Improve Credit – Build your credit score to qualify for more mortgage programs with better rates.
The Pros and Cons of 2 FHA Loans
Like any financial decision, holding two FHA mortgages has both advantages and disadvantages:
Pros
- Low down payments on both properties
- Buy and move before selling existing house
- Softer credit guidelines than conventional loans
Cons
- Higher monthly costs with two loan payments
- Complex application process meeting FHA rules
- Difficult to qualify carrying two mortgage payments
Homebuying Tips for FHA Borrowers
If you’re considering an FHA loan, keep these tips in mind:
- Shop mortgage lenders to compare interest rates
- Only borrow what you can reasonably afford
- Buy a home well within your budget
- Make a larger down payment if possible
- Ask about discount points to lower interest rates
- Refinance once you gain 20% equity and no longer need mortgage insurance
The Bottom Line
Qualifying for two FHA loans simultaneously is possible but challenging. Exceptions are made for certain situations like relocations and divorces, provided occupancy requirements are still met.
Thoroughly examine your budget and financial situation before taking on two mortgage payments. An alternative like a cash-out refinance may better suit your needs. But with proper planning and preparation, you can achieve the dream of owning two homes.
Eligibility requirements for more than one FHA loanHow many FHA loans can you have? If you meet the above-mentioned criteria for multiple FHA loans, the next step is to meet the eligibility requirements of obtaining more than one FHA loan at once. Credit score. Lenders use your credit score and down payment to determine eligibility. Down payment. According to the credit bureau Experian, a homebuyer can put as little as 5% down on an FHA loan if their credit score is 580 or higher. Homebuyers with a credit score between 500 and 570 will need a down payment of 10%. Debt-to-income ratio (DTI). DTI compares your debt to how much you earn. Lenders uses this ratio to determine a borrower’s ability to repay a mortgage loan. To calculate your DTI, add all your monthly expenses (debt payments) and divide that number by your gross monthly income (before taxes). A DTI of less than 43% is required. Other requirements. All borrowers will need to show proof of employment and income, a social security number, and other documents.
- Sell your current home. If you already own a home, it’s likely that the value has increased since you purchased it. Selling your home could result in a profit that you can use to purchase your next home using a conventional mortgage loan.
- Refinance your current FHA loan. Refinancing to a conventional loan would make it possible to eventually reapply for an FHA loan on a new primary residence in the future.
- Apply for a conventional mortgage. If you’re a first-time homebuyer you may qualify for a conventional mortgage loan as long as you meet the lender’s credit score and DTI requirements.
- Apply for a VA or USDA Loan. VA loans are only for U.S. military veterans and USDA loans are specifically for the purchase of properties that are in certain geographic areas. These types of loans are government programs that have flexible lending requirements, making it easier to qualify.
How many FHA loans can you have?
- You’re relocating for a new job and need a new primary residence.
- The new home is more than 100 miles away from your current FHA-financed home.
- Youre getting a divorce and you intend to purchase a new home in your name only.
- Your family is growing and you can provide evidence of additional legal dependents.
- You were a co-signer for your current FHA loan. If you are a co-signer on a family member’s FHA mortgage you may apply for an FHA mortgage on your own home purchase.
4 Ways To Have 2 FHA Loans At The Same Time
FAQ
Can I get another FHA loan if I already have one?
What are the exceptions to the second FHA loan?
Can I get an FHA loan if I already have a conventional loan?
Can you get two FHA loans at the same time?
Sell your current home. You can use the proceeds from selling your home to pay off your original FHA loan before you apply for an additional FHA mortgage. While you can qualify for two FHA mortgages at once, that’s the exception to the FHA loan rule. In most cases, you can’t have two FHA loans at the same time.
Can you get a second FHA loan?
If you have an existing FHA loan, you may wonder if you can get a second FHA loan to buy a new home. There is no limit to how many times a borrower can get an FHA loan. But there’s a catch: You can only have one at a time unless you meet specific criteria. Can You Get an FHA Loan More Than Once? You can get multiple FHA loans in your lifetime.
Can I get more than one FHA loan?
If you do not qualify to get more than one FHA loan there are still options for purchasing a home. Sell your current home. If you already own a home, it’s likely that the value has increased since you purchased it. Selling your home could result in a profit that you can use to purchase your next home using a conventional mortgage loan.
Can I buy multiple homes with FHA loans?
You can purchase multiple homes with FHA loans under the following circumstances: You’re relocating for a new job opportunity. This is common if your new job takes you to a different state and you haven’t been able to sell your current home. Your new home is more than 100 miles away from your current FHA-financed home.