An FHA loan is a type of mortgage that is backed by the federal government. It can help buyers with limited cash reserves and lower credit scores achieve the dream of homeownership.
If you have an existing FHA loan, you may wonder if you can get a second FHA loan to buy a new home. There is no limit to how many times a borrower can get an FHA loan. But theres a catch: You can only have one at a time unless you meet specific criteria.
Buying your first home is an exciting milestone in life. But once you’ve purchased a home, can you ever qualify for first time homebuyer benefits again? As it turns out, in some cases, yes you can!
As a first time homebuyer myself, I was curious if I could qualify for these helpful programs and loans in the future if I decide to purchase another home After doing quite a bit of research, I was pleasantly surprised to learn that you can in fact get a first time homebuyer loan twice under certain circumstances.
In this article, I’ll walk through when you can qualify as a first time homebuyer again, the key benefits of first time homebuyer loans and programs, and tips for leveraging these when buying your next home.
When Can You Qualify as a First Time Homebuyer Twice?
The definition of a “first time homebuyer” depends on a few factors:
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How long it’s been since you last owned a home If you haven’t owned a primary residence in the last 3 years, you can qualify again as a first time buyer
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Your marital status: If you previously co-owned a home with a spouse but are now single, divorced, or widowed, you may be able to qualify again.
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The type of home you owned: In some cases, if your previous home was a mobile home or otherwise didn’t meet building codes, you may still be considered a first timer.
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Displaced homemaker status: If you relied on a spouse or family member’s income and have been displaced from your home, you can qualify as a first time buyer again.
As long as you meet one of these criteria, lenders will consider you eligible for the benefits and flexible terms offered to first time buyers.
Key Benefits of First Time Homebuyer Loans and Programs
Why go through the trouble of qualifying as a first time homebuyer again? There are some excellent benefits that make it worthwhile:
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Lower down payment requirements: First time homebuyer programs often require just 3-5% down, compared to the traditional 20% down payment. This lower barrier to entry makes homeownership more accessible.
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Access to down payment assistance funds: Many state and local governments offer down payment assistance grants and loans to qualifying first time buyers. These programs provide thousands of dollars to help with your down payment and closing costs.
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Lower mortgage insurance requirements: First time homebuyer loans financed through FHA, VA, or USDA have lower mortgage insurance premiums than conventional loans. This results in a lower monthly payment.
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Better interest rates: Government-backed first time homebuyer loans often offer slightly lower interest rates than conventional mortgages. Over the life of your loan, a 0.5% lower rate can save you thousands.
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More flexible credit requirements: First time buyer programs tend to have lower credit score requirements and more lenient debt-to-income ratios. This helps those with less-than-perfect credit qualify.
Tips for Leveraging First Time Buyer Benefits
If you want to take advantage of first time homebuyer programs for a second time, here are some tips:
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Review first time homebuyer guidelines: Understand what criteria you need to meet to qualify again. Waiting at least 3 years since your last home purchase is key.
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Research available programs: There are federal, state, and local programs available. Make sure you know what’s on offer so you can maximize benefits.
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Talk to a lender early: Consult with lenders to discuss programs you may qualify for. They can guide you on the ideal loan products and down payment help options.
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Look into down payment assistance: Don’t leave free money on the table! Be sure to explore grants, loans, and gift programs that help with your down payment.
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Compare total costs: Don’t just look at interest rates. Consider factors like mortgage insurance, fees, and points to determine the lowest total cost loan.
The Bottom Line
While counterintuitive, under the right circumstances you absolutely can qualify for a first time homebuyer loan twice. Critical factors like time since your last home purchase, marital status changes, and type of home you previously owned allow repeat buyers to take advantage of these programs.
First time buyer benefits like low down payments, down payment assistance, better rates, and more flexible credit requirements provide significant help to homebuyers. By double-dipping into these programs, you can make homeownership more affordable.
If you’re in the market for your next home, explore whether you may be eligible for these first time buyer benefits again. With the right loan program and down payment help, you can more comfortably achieve the dream of homeownership a second time.
Can You Get an FHA Loan More Than Once?
You can get multiple FHA loans in your lifetime. But while you dont need to be a first-time homebuyer to qualify, generally speaking, you can only have one FHA loan at a time. This prevents potential borrowers from using the loan program to buy investment properties.
However, you may qualify for an additional FHA loan without selling or paying off your current property under the following circumstances:
- Youre relocating to an area thats beyond reasonable commuting distance to your current residence or where affordable rental housing is not available.
- Youre leaving a jointly owned property to buy a home, and the co-owner plans to remain in the home (such as in a divorce).
- You cosigned an FHA loan for someone else and now want to purchase your own home.
If you want to purchase another home with an FHA loan to accommodate your growing family, youll need to provide evidence of the increase in dependents and your current homes failure to meet your needs. You will also need at least 25% in equity in your current home to be eligible; if youre not there yet, youll need to pay down the loan balance until you reach 25% in equity to qualify.
As long as you meet one of these exceptions, there is no required waiting period between FHA loans.
Are you ready to apply for an FHA loan? Even if you already have an FHA loan, its a good idea to run through the loan requirements before applying for a new one.
- Down payment and credit score: Your required down payment will depend on where your score falls. You can put as little as 3.5% down on an FHA loan if your credit score is 580 or higher. Youll need a downpayment of 10% if your credit score is between 500 and 570.
- Debt-to-income ratio (DTI): Your DTI is the total of your monthly debt payments as a percentage of your monthly gross income. To qualify for an FHA loan, your DTI should be under 43%. To illustrate, lets say the monthly mortgage payment on the home youre considering would be $1,500 and your gross monthly income is $5,000. The amount of your other monthly debt obligations cannot be higher than $650. That said, you may be able to get approved with a DTI of up to 50% if the loan does not pose an elevated risk to the lender.
- Mortgage insurance: FHA loans require you to pay mortgage insurance, which is divided into two types of payments. You will be charged a flat fee of 1.75% of the loan amount at the time of closing, which can be rolled into your loan if you dont have the cash on hand. A monthly charge will also be tacked on to the mortgage payments to cover mortgage insurance for the life of the loan. This payment is also a percentage of the loan amount and is determined by the loan size, term and loan-to-value ratio (LTV).
- Other criteria: The lender will request your Social Security number and proof of income and assets to determine how much home you can comfortably afford. You should also be clear of any foreclosures for at least three years to qualify for an FHA loan.
Keep in mind that these are just general qualifying criteria. Some FHA-approved lenders have stricter requirements for potential borrowers. Its best to speak with a loan officer to get a better idea of their FHA loan requirements.
Can I Get an FHA Loan Twice
FAQ
Can you qualify for an FHA loan twice?
Can you have two first mortgages?
Can you get another FHA loan if you sold your house?
Can I get an FHA loan for more than the purchase price?
Can a first-time homebuyer get an FHA loan twice?
Yes, under certain circumstances, you may qualify as a first-time homebuyer even if you’ve owned a home before. You may be eligible for many first-time buyer programs, for example, if you haven’t owned a home in three years. Can I get an FHA loan twice? Yes, you can apply for an FHA loan even if you’ve had one before.
Do you qualify for a first-time home buyer loan?
Here are the basic requirements to qualify for some of the most popular first-time home buyer loans: Not all the rules listed above are necessarily set in stone. That’s because first-time home buyer loan requirements vary by program. Furthermore, none of the government agencies listed above actually underwrite their own loans.
Can I be a first-time homebuyer again?
Yes, under certain circumstances, you may qualify as a first-time homebuyer even if you’ve owned a home before. You may be eligible for many first-time buyer programs, for example, if you haven’t owned a home in three years.
How much does a first-time home buyer loan cost?
However, the amount might be as low as 3.5% if you go with an FHA loan, and some programs offer down payment assistance or zero-down options for eligible buyers. Understanding the first-time home buyer loan requirements for down payments is crucial when evaluating your options for purchasing your first home.