Can You Have More Than One FHA Loan? Everything You Need To Know

The FHA loan program offers homebuyers the ability to purchase a home with a low down payment and flexible credit requirements But if you already have an FHA loan, can you get another one? The answer is generally yes, you can have more than one FHA loan over your lifetime, but with some important caveats

What Is An FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). Key features include:

• Low down payments, as low as 3.5% with a credit score of 580 or higher
• Lenient credit requirements – you can qualify with a credit score as low as 500
• Loans for primary residences, not investment properties
• Mortgage insurance is required

FHA loans make homeownership attainable for buyers who may not qualify for conventional mortgages. However, in exchange for the perks, there are limits on how many FHA loans a borrower can have at once.

FHA Loan Limits – How Many Can You Have?

The FHA allows borrowers to take out multiple FHA loans over their lifetime However, there are restrictions on having more than one FHA loan at the same time

• You can generally only have one FHA loan at a time
• This is because FHA loans are for primary residences, not investment properties
• Having more than one simultaneous FHA loan is only allowed in special circumstances

This rule prevents investors from taking advantage of FHA loans by purchasing multiple investment properties.

When Can You Have More Than One FHA Loan?

There are a few scenarios where a borrower can qualify for two FHA loans at once:

• Relocating for a new job: If your new job requires you to move far away from your current home, you may qualify for a second FHA loan before the first one is paid off.

• Divorce: If you are divorced and awarded the marital home, your ex-spouse may qualify for a new FHA loan for their own primary residence.

• Increased family size: If your family has grown significantly and your current FHA home is now too small, you may qualify for a second larger home. You’ll typically need 25% equity in the first home.

• Cosigning You can cosign on an additional FHA loan for a family member while still having your own However, you take on responsibility for the second mortgage if they default.

• Purchasing a HUD home: Investors can purchase a HUD-owned property with an FHA loan, even if they already have an FHA mortgage on their primary residence.

In these limited cases, borrowers can have two FHA mortgages at the same time. But meeting the FHA guidelines can be difficult, and juggling two mortgage payments is risky.

How To Qualify For Two FHA Loans

To qualify for two FHA mortgages, you must prove to lenders you can handle both mortgage payments:

• Credit score: At least 580 for 3.5% down payment on each loan, or 500 for 10% down on each

• Debt-to-income ratio: Total monthly debt payments cannot exceed 43% of gross monthly income

• Down payment: At least 3.5% down on each loan with 580+ credit score, or 10% down with 500-579 score

• Mortgage insurance: Upfront and annual mortgage insurance premiums apply to each loan

• Reserves: Most lenders require enough savings to cover at least two mortgage payments

Meeting these strict requirements can be a major hurdle forgetting approved for two FHA loans simultaneously.

Alternatives To Multiple FHA Loans

If getting two FHA loans won’t work for you, consider these options instead:

• Conventional loan: If your finances have improved, you may now qualify for conventional financing with less restrictions.

• Sell first home: You can sell your current FHA property and use the proceeds to pay off that loan before getting a new FHA mortgage.

• Refinance and cash-out: You may be able to refinance your current FHA loan and take cash out to use as the down payment on a conventional mortgage for a second home.

• Other programs: Fannie Mae and Freddie Mac have options like HomeReady and Home Possible loans with low down payments and flexible criteria.

The Bottom Line

While you can have multiple FHA loans over your lifetime, in most cases you can only have one at a time. This limits investors from abusing the program. Exceptions for two simultaneous FHA loans exist but can be difficult to obtain. For more flexibility, look into conventional mortgages or specialized programs from Fannie Mae and Freddie Mac.