Can You Get An FHA Loan More Than Once? Everything You Need To Know

Getting an FHA loan can be a great way for many buyers to finally achieve the dream of homeownership. FHA loans are backed by the Federal Housing Administration and have more flexible credit and down payment requirements than conventional mortgages. This makes them ideal for those with less-than-perfect credit or limited savings.

If you currently have an FHA loan you may be wondering if you can qualify for another one in the future. The short answer is yes you can get an FHA loan more than once over your lifetime. However, there are important restrictions to be aware of.

In this comprehensive guide. we’ll cover everything you need to know about getting multiple FHA loans including

• FHA Loan Basics
• Can You Get An FHA Loan Twice?
• The Exception To Multiple FHA Loan Restrictions
• How To Qualify For More Than One FHA Loan
• Alternative Options To Multiple FHA Loans
• The Bottom Line

Let’s dive in!

FHA Loan Basics

First, let’s do a quick overview of what an FHA loan is and what makes it different than other mortgage options.

FHA loans are insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. Because they are government-backed, FHA loans offer lower down payments and more flexible credit requirements for borrowers.

Here are some of the key features of FHA loans:

• Down payment – Only 3.5% down required for those with a credit score of 580 or higher. This is much lower than the standard 20% down required for conventional loans.

• Credit score requirements – Minimum credit score of 500 required, making FHA loans accessible for those will less-than-perfect credit. Many conventional loans require scores of 620 or higher.

• Mortgage insurance – FHA loans require you to pay mortgage insurance premiums (MIP) to protect the lender in case of default. This adds to your monthly costs.

• First-time homebuyer status not required – You don’t have to be a first-time buyer to qualify for an FHA loan. This makes them attractive even if you’ve owned a home before.

• Primary residence only – FHA loans can only be used to finance a primary residence, not a second home or investment property. We’ll discuss more on this restriction later.

Now that we’ve covered the basics of FHA loans, let’s look at whether or not you can get more than one.

Can You Get An FHA Loan Twice?

The short answer is yes, you can absolutely take out more than one FHA loan during your lifetime if you meet the eligibility requirements.

However, there is an important caveat – in most cases, you can only have one FHA loan at a time.

This restriction is in place to prevent borrowers from using multiple FHA loans to buy investment properties. As mentioned above, FHA loans can only finance your primary residence, not a second home or rental property.

So while you can apply for multiple FHA loans over your lifetime, you usually can only have one active at a time. This prevents people from exploiting the lenient credit and down payment requirements to acquire real estate investments.

The Exception To Multiple FHA Loan Restrictions

There are some limited exceptions that allow you to take out a second FHA loan before paying off your current one. Here are some examples:

• Relocating for a new job – If your new job requires you to relocate beyond a reasonable daily commute from your current home, you may qualify for a second FHA loan.

• Divorce – If you are getting divorced and need to purchase a new primary residence, you may be eligible for a second FHA loan before paying off the first.

• Increased family size – If your family has grown significantly and your current home no longer meets your needs, you may qualify for a second FHA loan. You’ll need to provide documentation that your family size has increased.

• Co-signing – If you co-sign an FHA loan to help another borrower get approved, you may still qualify for your own FHA mortgage.

In these limited cases, borrowers can have two active FHA loans at the same time. However, you’ll still need to meet strict eligibility standards which we’ll cover next.

How To Qualify For More Than One FHA Loan

Getting approved for two FHA loans simultaneously is difficult and requires meeting rigorous financial criteria. Here are some of the key requirements:

• Debt-to-income ratio (DTI) – Your total monthly debts, including both mortgage payments, cannot exceed 43% of your gross monthly income. A high DTI makes qualifying for a second loan very challenging.

• Down payment funds – You must have enough cash on hand for the down payment and closing costs on the second home, after already putting down 3.5% on your first FHA property. Saving for two down payments requires significant cash reserves.

• Mortgage insurance – You’ll have to pay the upfront mortgage insurance premiums on both loans as well as higher monthly premiums for having two active FHA mortgages.

In most cases, borrowers struggle to meet the strict DTI and down payment requirements for a second FHA loan. But if you can check all the boxes, it is possible in limited circumstances.

Alternative Options To Multiple FHA Loans

If you don’t qualify for two FHA loans at once, you have a few other options:

• Apply for a conventional mortgage on your second home. Conventional loans have stricter credit requirements but may be possible if you’ve built up equity and improved your credit.

• Wait to apply for another FHA loan until you pay off your existing one. This eliminates concerns over high DTI ratios from managing two mortgage payments.

• Sell your current home and use the proceeds to pay off the first FHA loan in full before applying for a second. This allows you to get FHA financing again for a new primary residence.

• Refinance your current FHA loan to a conventional loan and use cash-out proceeds for a down payment on a second home

Carefully compare all your options before applying for multiple FHA loans. While possible in limited cases, alternative mortgages may better suit your needs and financial situation.

The Bottom Line

The bottom line is that while you can qualify for multiple FHA loans over your lifetime, you generally can only have one active at a time. This restriction prevents the common use of FHA financing on investment properties.

In certain circumstances – like relocation or divorce – borrowers can qualify for a second FHA loan. But you must have excellent credit, large cash reserves, and a low debt-to-income ratio.

For most borrowers, alternative options like conventional loans, selling your home, or refinancing to cash-out may be better strategies for purchasing a second home. Carefully consider all your choices before applying for multiple FHA mortgages.