Can You Qualify for an FHA Loan Twice?

Getting approved for an FHA loan can be a great way for many homebuyers to achieve the dream of homeownership. With low down payment requirements and flexible credit standards, FHA loans make it possible to buy a home even if you don’t have perfect credit or a lot of cash saved up.

But if you already have an FHA loan and want to buy another home you may be wondering – can you qualify for a second FHA loan? Or are you limited to just one FHA loan at a time?

The short answer is yes, it is possible to qualify for multiple FHA loans over your lifetime. However, there are strict rules around having more than one FHA loan at the same time. Let’s break down the details so you understand exactly when and how you can qualify for a second FHA mortgage.

You Can Get Multiple FHA Loans, But Only One at a Time

The Federal Housing Administration, which insures FHA loans, does allow borrowers to obtain multiple FHA mortgages over their lifetime. There is no specific limit to the number of FHA loans you can have during your life.

However, there is generally a rule that you can only have one FHA loan at any given time. This rule is in place to prevent borrowers from trying to use multiple FHA loans to buy investment properties or vacation homes. FHA loans are intended to help borrowers purchase a primary residence, not accumulate real estate assets.

So if you currently have an FHA loan and want to buy a new primary residence using another FHA loan, you would typically need to sell your current home first and pay off the existing FHA loan.

Exceptions That Allow You to Have Two FHA Loans

While the one FHA loan at a time rule is strict, there are some exceptions where you may qualify to take out a second FHA loan before selling your current home or paying off the existing FHA mortgage.

Some examples of situations where a second FHA loan may be allowed include:

• Relocating for a new job: If you need to move for a new job that is not within reasonable commuting distance of your current home.

• Divorce: If you are divorcing and need to purchase a new home, while the spouse stays in the jointly-owned property you are leaving.

• Family size increase: If your family has significantly grown in size and your current home no longer meets your needs. You’ll need to provide documentation of the family member increase.

• Co-signing for someone else: If you co-signed an FHA loan to help someone else buy their home, but now want to buy your own property.

In these special cases, you don’t need to wait any specific amount of time between taking out the two FHA loans. However, you do need to prove that you can afford both mortgage payments to qualify for the second FHA loan.

Meeting FHA Loan Requirements for Two Mortgages

While the FHA provides some exceptions for getting a second loan, the approval standards are still stringent to qualify for two FHA mortgages at once. Here are some key criteria the lender will evaluate:

• Credit score: To qualify for any FHA loan, you need a minimum credit score of 500, with at least 580 for the 3.5% down payment option. The lender will check your current score to ensure you meet the threshold.

• Debt-to-income ratio: Your total monthly debt payments, including both mortgage payments, must remain under 43% of your gross monthly income. A higher ratio makes it hard to qualify.

• Down payment: You must have enough cash to put 3.5% or 10% down on the new property purchase, depending on your credit score.

• Mortgage insurance: All FHA loans require you to pay mortgage insurance premiums, adding to your monthly costs.

• Savings: Many lenders require enough savings to cover a few months of mortgage payments in case of lost income.

As you can see, the bar is high for qualifying for two FHA home loans at the same time. That helps protect the lender and ensures borrowers don’t end up overextended.

Alternatives if You Don’t Qualify for Two FHA Loans

If your financial situation doesn’t allow you to take out a second FHA loan to buy another home, you have a few options:

• Apply for a non-FHA mortgage – Consider a conventional or USDA loan which may have more flexible requirements. But the down payment will likely be higher.

• Sell current home first – Pay off existing FHA loan before applying for a new FHA loan on your next home. This avoids needing to carry two mortgages.

• Rent out current home – If not selling, rent out current home to help pay existing mortgage until the second FHA loan is paid off.

• Take out home equity – Refinance existing FHA loan and take cash out to use as down payment on a different type of mortgage for next home purchase.

• Delay the second purchase – Give yourself time to pay down current FHA loan and save more for down payment before trying to qualify for a second home purchase.

While qualifying for a second FHA mortgage is possible, it isn’t easy. But with planning and smart financial decisions, you may be able to set yourself up for a subsequent FHA loan application when the time is right.

Final Thoughts on Getting Approved for Multiple FHA Loans

The bottom line is that qualifying for two FHA mortgages simultaneously is difficult, but not necessarily impossible if your financial profile hits the right notes. While exceptions are made, the general rule is that you can only have one FHA loan at a time. This prevents misuse of FHA loans to acquire investment properties.

If buying another home before you sell or pay off the current one is a priority, you’ll need to carefully evaluate if your income, savings, credit score and total monthly debt obligations make you an eligible candidate for a rare exception to get a second FHA loan approved. Consulting with a mortgage loan officer to go over your specific situation is highly recommended. That will help you determine what mortgage options may be within your reach.

With an FHA loan already in place, chances are you worked hard to qualify the first time around. So being thoughtful and strategic when pursuing a second FHA loan is key. While not easy, with the right approach, it may be possible to eventually qualify for multiple FHA mortgages over your lifetime as your real estate needs change over the years.