The FHA loan program offers flexible lending guidelines and low down payments, making homeownership attainable for many buyers. With benefits like 3.5% down and lenient credit requirements, you may wonder – can I get more than one FHA loan?
The short answer is yes, you can get multiple FHA mortgages over your lifetime However, there are limitations on having two FHA loans at the same time. This comprehensive guide will explain FHA loan rules on multiple properties, qualifying for two FHA loans, and alternatives to using FHA financing twice
Overview of FHA Loan Usage Rules
The Federal Housing Administration insures FHA loans which are issued by private lenders. As government-backed mortgages, FHA loans come with specific usage requirements.
The primary restriction is that FHA loans can only be used to finance a primary residence where you plan to live. This means no investment properties or vacation homes. FHA wants to promote affordable homeownership not real estate investment.
Additionally, you can only have one FHA loan at a time in most cases. This prevents buyers from tapping easy FHA financing to buy multiple investment properties. You can have two simultaneous FHA mortgages only in special circumstances.
When Can You Get a Second FHA Mortgage?
Given the “one FHA loan at a time” rule, you may be wondering – under what situations am I allowed to take out another FHA loan?
The good news is FHA guidelines do provide for exceptions to give borrowers flexibility in certain scenarios Here are the main situations where a second FHA loan may be permitted
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Job relocation – If you need to move for a new job but can’t sell your current home with an FHA loan yet.
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Growing family – When your family size has increased significantly and your current FHA home no longer meets your needs. At least 25% home equity is usually required in this case.
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Divorce – If a divorce decree grants your spouse possession of your joint FHA-financed home.
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Cosigning – Cosigning on an FHA loan for a family member doesn’t preclude you from getting your own FHA mortgage.
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100 mile distance – Your new and current FHA home must be at least 100 miles apart. This ensures it’s not an investment property.
As you can see, the FHA wants to promote affordable homeownership stability for families, not provide easy financing for investors. Validating occupancy requirements is key.
Qualifying for Two FHA Loans
If you meet one of the exception scenarios, you still need to prove you can handle two FHA mortgage payments to get approved for a second loan.
Here are key factors lenders evaluate:
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Credit score – At least 580 for 3.5% down or 500-579 for 10% down. Strong scores make approval easier.
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Debt-to-income ratio – Your total monthly debt payments, including both mortgages, cannot exceed 43% of gross monthly income.
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Down payment – You must make a 3.5% or 10% down payment depending on your credit score. Gift funds generally don’t count.
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Occupancy – Your new home must be your primary residence at least 100 miles from the current FHA property.
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Equity – If keeping your existing FHA home as a rental, you’ll need 25% home equity. Rental income offsets the payment.
Providing documentation of these requirements is key to getting the green light for two FHA loans.
Alternatives to Multiple FHA Loans
Two FHA loans simultaneously is possible but tricky. If you don’t meet the exceptions, here are alternatives to get affordable low down payment financing:
Fannie Mae HomeReady – Down payments as low as 3% on primary residences for qualifying low-income borrowers.
Freddie Mac Home Possible – 3% down payments on primary residences in low-income census tracts.
VA Loans – 0% down with no PMI for eligible military members. Can be used for two simultaneous loans.
USDA Loans – 0% down loans for low-income buyers in designated rural areas.
Conventional 97 – 3% down conventional loans now widely available for primary residences.
Depending on your circumstances, one of these options may provide an easier path to financing a second home if FHA guidelines don’t align.
The Bottom Line
While you can get multiple FHA loans over your lifetime, rules strictly limit having two FHA mortgages simultaneously. These safeguards ensure affordable FHA financing aids primary homeownership, not real estate investment. If an FHA exception doesn’t apply to your situation, alternative mortgage programs may better serve your needs.
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.
How You Can Have TWO FHA Loans *100 Mile Rule*
FAQ
Can I get an FHA loan if I already have one?
Can a buyer have 2 FHA loans?
Can you be denied a FHA loan?
How much FHA loan do I qualify for?
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Credit Score
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Maximum Loan Amount
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Minimum Down Payment
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580+
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96.5% of home value
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3.5% of purchase price
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500 – 579
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90% of home value
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10% of purchase price
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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?
While there’s no limit to how many FHA mortgages you can get during your lifetime, you can generally only have one FHA loan at a time because you can only have one primary residence. This restriction helps keep the loan program – and its lenient requirements – from being used to purchase investment properties. When
Can I use an FHA loan more than one?
Yes, you will be able to use an FHA loan more than one. Just because you bought a home with FHA loan in the past, it doesn’t mean you can’t qualify for an FHA loan the second time. Once the previous home loan is paid off, you will be able to apply for another one.
Can I use an FHA loan to buy a home?
You can use an FHA loan to buy, build or renovate a home, or to refinance an existing mortgage. If you take out an FHA loan with a down payment less than 20 percent, you’ll pay mortgage insurance premiums along with your mortgage payments. An FHA loan helps borrowers with lower credit scores and down payment savings finance a home.