Can You Use An FHA Loan More Than Once?

The Federal Housing Administration’s mortgage insurance program makes homeownership more accessible for many buyers. FHA loans only require a 3.5% down payment and have flexible credit requirements. But can you get more than one FHA loan?

While you can qualify for multiple FHA loans over your lifetime, there are restrictions on having more than one at the same time. Let’s explore the details on whether you can use an FHA loan more than once.

How Many FHA Loans Can You Have at One Time?

In most cases, you can only have one FHA loan at a time. This restriction prevents borrowers from abusing the program’s lenient qualification requirements to purchase multiple investment properties.

Since FHA loans are intended for primary residences, the FHA only wants you to use the loan to buy one home to live in. While you can qualify for multiple FHA mortgages throughout your life, you typically can’t have two FHA home loans at the same time.

Having more than one FHA loan simultaneously used to be possible, but the FHA tightened restrictions in the 1990s. Now the only way to have two FHA loans at once is if you meet narrow exemption criteria.

When Can You Get Another FHA Loan?

As a general rule, you must sell your home and pay off your current FHA loan before getting another FHA mortgage. However, some special situations may allow you to qualify for a second FHA loan.

Here are some examples of situations where you may be able to get approved for an additional FHA loan

• Relocating for a job: If you need to move for a new job that’s beyond a reasonable daily commute from your current home, you may qualify for a second FHA loan.

• Divorce If you co-signed an FHA loan with a spouse you’re divorcing you may be eligible for another FHA mortgage after moving out of the shared home.

• Increased family size: You may be able to qualify for another FHA loan if your family grew in size and your current home no longer meets your needs. You’ll need to provide documentation that your family increased and that your existing house is now too small.

• Co-signing: If you co-signed an FHA loan to help someone else buy a house, you can get another FHA mortgage for your own primary residence.

As long as you meet one of those exceptions, there’s no mandatory waiting period before getting another FHA loan. But you do have to meet all the normal FHA borrowing requirements.

FHA Loan Requirements

While FHA loans are more flexible than conventional mortgages, you still need to meet certain criteria. Here are some key FHA loan qualifications to keep in mind:

• Credit score: With a minimum 580 FICO score, you can qualify for an FHA loan and only need a 3.5% down payment. If your score is 500-579, you’ll need a 10% down payment.

• Debt-to-income ratio: Your total monthly debt payments, including the mortgage, typically can’t exceed 43% of your gross monthly income. But some lenders may approve ratios up to 50%.

• Mortgage insurance: FHA loans require upfront and annual mortgage insurance premiums, adding to your long-term costs.

• Cash reserves: Many lenders want to see you have at least two mortgage payments’ worth of reserves after closing.

Meeting those requirements while having current mortgage payments may make getting approved for an additional FHA loan challenging. But it’s possible for some borrowers.

How Soon Can You Get Another FHA Mortgage?

If you meet one of the exceptions for having two FHA loans simultaneously, there’s no mandatory waiting period before applying for the second loan. You can get approved for another FHA mortgage right after closing on your current one.

But there are practical considerations that mean waiting could be wise, such as:

• Not overextending your finances with two mortgage payments
• Giving yourself time to build home equity
• Letting your credit profile improve after the initial mortgage approval

Building equity and credit scores takes time. If you wait a few years after your first FHA loan to apply for another, you may have an easier time getting approved and score better mortgage rates.

Alternatives to Getting Multiple FHA Loans

If you want or need to buy another home but don’t qualify for multiple FHA mortgages, you have alternatives:

Conventional loan: You may be able to qualify for a conventional mortgage with more flexibility on the number of loans. But you’ll likely need a higher credit score and bigger down payment than FHA requirements.

Sell first home: By selling your current house and paying off the FHA loan, you can get another FHA mortgage more easily for the next home.

Cash-out refinance: You may be able to tap equity in your current home by refinancing into a bigger FHA or conventional loan. Then use the cash for the next home’s down payment.

Improve credit: Building your credit score over time can open more options when you need another mortgage.

Depending on your goals and financial circumstances, FHA may or may not be the optimal loan program for multiple real estate purchases.

The Bottom Line

While you can get multiple FHA loans over your lifetime, rules prohibit having more than one FHA mortgage for your primary residence at the same time in most cases. This helps restrict use of FHA-insured financing to owner-occupied homes only.

If you meet limited exemption criteria, you can qualify for two FHA loans at once. But you’ll need to prove you can handle two mortgage payments. For borrowers who don’t meet exemptions, paying off the first FHA loan before getting another is typically required.