Can I Get Another FHA Loan? An In-Depth Look at FHA Borrowing Rules

The FHA loan program offers homebuyers the chance to purchase a home with a low down payment and flexible credit requirements. But can you get more than one FHA loan? The answer isn’t so straightforward.

While you can get multiple FHA loans throughout your lifetime, you generally can only have one FHA loan at a time There are some exceptions that allow borrowers to qualify for a second FHA loan before paying off their first. But the rules aim to prevent buyers from using FHA financing to purchase multiple investment properties.

Let’s take an in-depth look at FHA guidelines on multiple loans and when you may qualify for two FHA mortgages at once.

How Many FHA Loans Can You Have?

The Federal Housing Administration (FHA) insures FHA loans made by approved lenders. FHA loans only require a 3.5% down payment for buyers with credit scores of 580 or higher.

But in exchange for low down payments and flexible credit standards FHA loans come with occupancy requirements. You must plan to use the property as your primary residence.

The FHA designed its mortgage program to help low- and moderate-income buyers purchase their first home. The agency doesn’t want real estate investors taking advantage of FHA loans by financing multiple investment properties.

So in general, you can only have one FHA loan at a time. You can apply for multiple FHA mortgages throughout your lifetime. But until you sell the home or pay off the first FHA loan, you usually can’t take out another.

When Can You Get an Additional FHA Loan?

Certain situations may qualify you for a second FHA mortgage before you sell or pay off your initial FHA home loan, But you’ll need to meet eligibility rules

Here are some examples of when you may qualify for two FHA loans at once:

• Relocating for a new job: If your new job requires you to move far away from your current home, FHA rules allow you to purchase a second house with FHA financing. Your new home must be at least 100 miles away.

• Getting a divorce: If you’re awarded the home in your divorce decree, you may qualify for an additional FHA loan to buy a new house.

• Family size increased: FHA guidelines permit a second loan if your family has grown larger and your current home no longer meets your needs. You’ll need to show proof your family size increased.

• Cosigning for someone: You can cosign on an FHA loan for a family member while still having your own FHA mortgage. But remember you’ll be responsible for the debt if they stop paying.

• Purchasing a HUD home: FHA loans can be used to purchase a home that was foreclosed on by HUD without needing to live in it.

In most cases, the second FHA-financed home must be at least 100 miles away from the first home. And you’ll need to qualify based on your income, debts, and credit score.

FHA Loan Requirements to Qualify for Two Mortgages

To get approved for two FHA loans, you must meet eligibility criteria that ensures you can afford both mortgage payments. Here are some key FHA requirements:

• Credit score: The minimum FICO credit score is 580 for a 3.5% down payment. If your score is 500-579, a 10% down payment is required.

• Debt-to-income ratio: Your total monthly debt payments, including both mortgages, cannot exceed 43% of your gross monthly income.

• Down payment: You’ll need to fund two down payments. The minimum is 3.5% of the purchase price if your credit score is 580+ or 10% for scores of 500-579.

• Mortgage insurance: All FHA loans require you to pay mortgage insurance premiums, adding to your costs.

• Occupancy rules: Your second FHA loan typically needs to be on a primary residence at least 100 miles away from the first home.

• Reserves: Most lenders want to see you have at least two months of mortgage payments saved in your bank account.

Meeting all the requirements for two FHA loans can be challenging. Make sure you can truly afford both mortgage payments plus expenses.

Alternatives to Getting Two FHA Loans

Not everyone will qualify for two FHA mortgages at the same time. Here are some alternatives if you want or need another home loan:

• Refinance your FHA loan into a cash-out refinance to tap home equity for a down payment on a second home.

• Take out a different type of mortgage on the second home, such as a conventional loan.

• Sell your current home and pay off the FHA loan before applying for a new FHA mortgage.

• Pay off your existing FHA loan before trying to qualify for a second FHA mortgage.

• Wait to buy another home until you’ve paid down your loan balance and built up more home equity.

The Bottom Line

While you can get multiple FHA loans over your lifetime, rules generally restrict you to just one FHA loan at a time. This prevents abuse of the program by real estate investors.

But certain circumstances may allow you to qualify for two FHA mortgages simultaneously. Just remember it can be challenging to afford two home loans. Make sure you understand all FHA requirements before pursuing two loans.