Can I Have 2 FHA Loans at Once?

FHA loans are a popular mortgage option for many homebuyers. They only require a small down payment of 3.5% and are insured by the Federal Housing Administration. With such attractive features, you may be wondering if you can have more than one FHA loan at the same time. The short answer is generally no, you can’t have two FHA loans concurrently. However, there are some exceptions.

The FHA has restrictions in place to prevent borrowers from abusing the program’s low down payment option. FHA loans are intended for owner-occupants purchasing a primary residence, not real estate investors. So the FHA limits borrowers to just one loan at a time in most cases But there are a handful of situations where you might qualify for two FHA mortgages simultaneously

Exception #1: Relocating for a New Job

If you need to move to a new area for a job opportunity and haven’t been able to sell your current home yet, the FHA may allow you to take out another loan. This scenario often happens when a job transfer requires you to relocate to another state, leaving your existing home vacant.

As long as you can prove the new FHA mortgage is for your new primary residence located in a different area, and you plan to sell the initial home, an exception may be granted. Just be aware your debt-to-income ratio will be stretched thinner across two mortgage payments.

Exception #2: Purchasing a Home Over 100 Miles Away

FHA guidelines state that if your new home financed with an FHA loan is over 100 miles away from your current FHA-backed property, you may qualify for a second loan.

The FHA wants to verify the new home is not an investment property or second home, but will actually be occupied as your new primary residence. The 100 mile rule helps confirm this. You’ll still need to meet all other FHA loan eligibility requirements.

Exception #3: Family Size Increase Justifies Larger Home

Growing families sometimes need to upsize to a larger home. The FHA recognizes this so they may approve a second loan if you can prove the new bigger home is warranted by an increase in family size.

However, there are caveats. You’ll likely need at least 25% equity in your current home. And the second loan may have to be via a non-FHA lender, like a conventional, VA or USDA loan. Ask your lender about options.

Exception #4: Divorce Situation Calls for Two Homes

In the event of a divorce, the FHA understands that two separated spouses may need to maintain two individual homes, even if financed previously under one FHA loan.

If you provide proper legal divorce documentation showing your former spouse was awarded possession of your shared FHA-backed home, you may be cleared for a new FHA mortgage on your own home. This exception aims to help accommodate difficult divorce proceedings.

Exception #5: Cosigning on Someone Else’s FHA Loan

Suppose you want to cosign on an FHA purchase for a family member to help them qualify. As long as you are not also a co-borrower on the new loan, this is allowed under FHA rules.

You’ll sign the mortgage note as a cosigner but your name won’t be added to the property title. This avoids you technically having ownership interest in two FHA homes. You are simply assisting someone else’s loan application, not taking out two loans yourself.

Exception #6: Refinancing Investment Properties

If you previously purchased investment properties using FHA financing but no longer live there, you may be able to refinance via an FHA streamline loan. This process doesn’t require an appraisal or income verification.

The property must be refinanced as a rental to qualify. And your primary residence must be refinanced first before any second homes or investment properties. Refinancing investment property is limited to streamline loans.

Tips for Qualifying for Two FHA Loans

While tricky, qualifying for two FHA loans at once is possible if you meet the exceptions. Here are some tips to boost your chances:

• Maintain a debt-to-income ratio below 43% – Carrying two mortgages will eat into your DTI so keep it low.

• Make a larger down payment if possible – Though not required, a bigger down payment reduces risk for lenders.

• Have ample cash reserves – Showing you have emergency savings makes approval more likely.

• Pick a knowledgeable lender – Work with a lender experienced in multiple FHA loans.

• Get your ducks in a row – Have proper documentation to prove your exception eligibility.

Alternatives to Multiple FHA Loans

If you don’t qualify for two FHA loans, don’t fret. Here are some alternative mortgage programs to consider:

Fannie Mae HomeReady®

• 3% down payment option
• For low-to-moderate income borrowers
• 620 minimum credit score

Freddie Mac Home Possible®

• 3% down payments
• Income limits same as HomeReady
• Minimum 660 credit score

VA Loans

• 100% financing for eligible veterans
• No down payment or PMI needed
• Credit scores often 620+

USDA Loans

• 100% financing in designated rural areas
• For moderate income borrowers
• Typically requires 620+ credit

The Bottom Line

While rare, there are legitimate reasons why someone may need two FHA loans concurrently. Should an exception fit your situation, take steps to strengthen your application. Or look into similar low down payment loan programs. But generally, the FHA intends for borrowers to only hold one loan at a time.