Yes, you can get an FHA loan for a second home if your purchase is because of an âundue hardship,â such as getting a job thatâs over 100 miles from your current house or outgrowing your current house.
The FHA loan program is popular for financing primary residences especially among first-time homebuyers. But when it comes to second homes there are strict limitations on using FHA financing. In most cases, you cannot get an FHA mortgage for a vacation property or second residence.
However, there are some specific exceptions where an FHA-backed loan may be allowed for a second home. In this comprehensive guide, I’ll explain FHA’s general policy on second homes, exceptions that may qualify, FHA requirements for a second home, and alternatives if you don’t meet the criteria.
FHA’s Stance on Second Homes
The FHA mortgage program is focused on helping borrowers become homeowners by financing primary residences. All FHA loans require the borrower to occupy the home as their primary residence within 60 days of closing.
FHA guidelines explicitly prohibit using FHA financing for investment properties, vacation homes, timeshares, or any “transient occupancy”. According to HUD 4000.1, the FHA handbook:
“FHA will not insure more than one Property as a Principal Residence for any Borrower except as noted below. FHA will not insure a Mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining Investment Properties even if the Property to be insured will be the only one owned using FHA mortgage insurance.”
So in general, you cannot get an FHA loan for a vacation property or second home. But there are some exceptions where a second FHA loan may be approved if there is a justifiable hardship.
Exceptions Where a Second FHA Loan is Allowed
While the FHA’s general policy is that borrowers can only have one FHA loan at a time, there are scenarios where they make exceptions for a second home:
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Relocating for a job: If your new job is over 100 miles from your current home, FHA may approve a second loan.
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Increase in family size: If your household has grown to the point your current home no longer meets your needs.
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Vacating a jointly owned home: If you previously co-owned a home but are now buying one on your own.
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Non-occupying co-borrower: If you were a co-borrower on an FHA loan but are now buying your own home.
In all of these cases, you must provide documentation to verify your situation warrants an exception. The home must be a primary or second residence, not a rental or vacation property.
FHA Requirements for a Second Home
If you meet one of the exceptions for a second FHA loan, there are still strict requirements:
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15% minimum down payment – You can only borrow up to 85% of the home’s value.
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Credit score of at least 580 – No bankruptcies or foreclosures in recent years.
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Debt-to-income ratio below 43% – Including mortgage payments on current home.
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Occupied for a portion of the year – Must be occupied more than 14 days per year.
In addition, the new home cannot be a rental or vacation property. It must be your new primary or secondary residence.
Alternatives if You Don’t Qualify for FHA
If you don’t meet FHA’s strict requirements for a second mortgage, you have a few options:
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Conventional loan – 10% down payment required and credit score of at least 680.
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Fannie Mae HomeReady – Designed for low-income borrowers, only 3% down.
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Portfolio loan – An alternative mortgage option offered by some lenders.
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USDA loan – For rural properties, 100% financing available.
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Renovation loan – FHA 203(k) or homestyle renovation to finance repairs.
While you likely cannot use an FHA loan for a second home, other mortgage products are available. Consult with a loan officer to discuss your specific situation and financial details to determine the best loan program.
5 Tips for Financing a Second Home
If you’re able to qualify for a mortgage on a second residence, keep these tips in mind:
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Shop around for the best rates and programs. Each lender has different offerings.
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Expect higher interest rates compared to a primary home purchase.
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Be ready to make a larger down payment, often at least 10-20%.
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Make sure your debt-to-income ratio remains low. Lenders will be conservative.
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Consider a lower-cost USDA loan if your property is in a rural area.
Purchasing a vacation home or second residence is difficult, but possible with the right financing strategy. With thorough planning and persistence, you can find a loan that works for your situation.
Frequently Asked Questions
Can I get an FHA loan for a second home?
In most cases, no. FHA financing is limited to primary residences. But there are exceptions for hardship situations that allow a second FHA loan.
What does the FHA consider a second home?
A secondary residence is a home you plan to occupy for a portion of the year, not a rental or vacation property. It must be occupied more than 14 days annually.
Can I rent out an FHA-financed second home?
No. Homes financed with FHA loans cannot be used as rental properties, even if they are a second residence.
How much down payment is needed for an FHA second home?
You must make a down payment of at least 15% of the purchase price for a second home with an FHA loan.
What are my alternatives if I don’t qualify for an FHA second mortgage?
Conventional loans, Fannie Mae HomeReady, portfolio lending, USDA loans, and renovation loans are potential alternatives if you don’t meet FHA second home requirements.
Frequency of Entities:
FHA loan: 16
second home: 15
primary residence: 5
down payment: 4
vacation property: 3
rental property: 2
How you can get an FHA loan for a second home
You can get a second loan from the Federal Housing Administration (FHA) if youre:
| ð Relocating for a new job thatâs more than 100 miles from your primary residence |
| ðª Adding legal dependents and need a bigger home |
| ð Leaving a home you owned with others and now looking for your own home |
| ð A coborrower on someone elses loan but now looking for your own home |
If you need to work on-site at least 100 miles from your home, the FHA may approve a second loan application.
It doesnât have to be a job that you work year-round. It can be seasonal employment or a property near one of your primary clients. As long as you can show that work motivates your purchase, the FHA will likely approve your loan application.
In some instances, the FHA may allow you to rent out your primary or secondary home when youâre not using them. Just be careful â if theres suspicion youâre trying to buy a rental property, your application will likely get denied.
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ð Does your new job have to be more than 100 miles away? In most cases, yes. The FHA may allow exceptions for commutes that pass through heavy-traffic areas. |
Vacating a jointly owned property
In most scenarios, the FHA will allow you to get a second FHA loan if you decide to move out of a primary residence you owned with someone else, even if the other borrowers stay.
Borrowers who leave should have no intention of returning. For instance:
- You may have bought a house with friends or family members, but now youâd like a place of your own.
- You could be going through a divorce and are planning to buy your new primary residence.
In these scenarios, you can get a second FHA loan even if you stop payments on the first.
Non-occupying borrowers â that is, coborrowers who are contributing to mortgage payments of an FHA-funded property but dont live there â can apply for a second FHA loan. As long as youâre not living in the first home, you should have no problems getting an FHA loan for the second.