Can You Use an FHA Loan More Than Once? Everything You Need to Know

Getting an FHA loan can be a great way for many folks to finally achieve their dream of homeownership. With lenient credit requirements and low down payments, FHA loans open the door to buying a home even if your finances aren’t perfect.

But what if you’ve already used an FHA loan in the past – can you get another one? Are there any restrictions on how many times you can use an FHA loan?

I’ll cover all the details in this comprehensive guide on whether or not you can use an FHA loan more than once.

Overview of FHA Loans

First, a quick refresher on what exactly FHA loans are and how they work.

FHA loans are a type of government-backed mortgage insured by the Federal Housing Administration. Because the government insures these loans, lenders are able to offer more flexible terms compared to conventional mortgages.

Here are some of the key features and benefits of FHA loans

• Low down payments – You can put down as little as 3,5% with an FHA loan This makes them very attractive to buyers who don’t have a lot saved for a down payment

• Lenient credit requirements – FHA loans require a minimum credit score of just 580. Many conventional loans require scores of 620 or higher.

• No income limits – There are no income limits to qualify for an FHA loan. Your debt-to-income ratio just needs to be below 43%.

• Lower mortgage insurance – FHA loans require mortgage insurance no matter your down payment size. But the premiums are lower than with conventional loans.

Now that we’ve covered the basics of FHA loans, let’s look at whether or not you can use this type of financing more than once.

Can You Get Another FHA Loan After Using One Before?

The short answer is yes – you can absolutely get another FHA loan even if you’ve had one in the past.

There is no limit to how many times you can use FHA financing over your lifetime. For example, if you purchased your first home with an FHA loan but are now looking to move and buy another property, you can get another FHA mortgage for your new home.

Your past use of an FHA loan does not disqualify you from using the program again in the future.

However, there is one important caveat…

You Can Only Have One FHA Loan at a Time

While you can get multiple FHA loans over your lifetime, you generally can only have one FHA loan open at any given time.

This restriction exists because FHA loans are intended for owner-occupied primary residences. You cannot use FHA financing to buy investment properties or vacation homes that you won’t live in full-time.

The one FHA loan at a time rule prevents people from leveraging the lenient credit requirements and low down payments to build up real estate portfolios. It helps keep the lending program focused on helping people buy primary homes.

So if you currently have an FHA loan and are looking to buy a new primary residence, you typically need to sell your current home first and pay off the old FHA loan before getting a new one.

Let’s look at a couple examples to illustrate:

• Sarah bought her first home 5 years ago using an FHA loan. She’s looking to upgrade to a bigger house now. She can absolutely get another FHA loan for her new home purchase. But first, she’ll need to sell her current home and pay off the FHA mortgage.

• Dan currently has an FHA loan on his primary residence. He wants to buy a beach condo as a vacation home. He cannot use another FHA loan to finance the second home since he won’t live there full-time.

As you can see, the key is that you can only have one FHA loan open that is secured by your primary residence.

Exceptions That Allow Multiple FHA Loans

While generally you can only have one FHA loan at once, there are some exceptions where you may qualify for a second FHA mortgage under special circumstances:

Relocation for a new job: If you need to relocate for a new job that is beyond a reasonable daily commute from your current home, you may qualify for a second FHA loan on a new primary residence in the new location.

Divorce: If you jointly owned a home with an ex-spouse and are now buying your own place after a divorce, you may be eligible for another FHA loan before the first is paid off.

Family size increase: If your family has significantly grown to the point that your current FHA-financed home no longer meets your needs, you may be approved for a second loan to accommodate the larger household.

Co-signing: If you co-signed on an FHA loan for someone else but want to buy your own primary residence, you can get a second FHA mortgage just for yourself in some cases.

Non-occupying co-borrowers: Non-occupying co-borrowers on an existing FHA loan may still be able to get their own FHA loan for a new primary residence.

The exceptions are situational and lenders will look at your specific circumstances to determine if a second FHA loan may be allowed. But it is possible in some cases to have two active FHA loans.

Tips for Getting Another FHA Mortgage

If you’re hoping to get approved for another FHA loan, keep these tips in mind:

• Have a 12 month history of on-time payments on your existing FHA loan. This helps demonstrate you are still a responsible borrower.

• Check your credit scores and address any issues beforehand. FHA requires minimum scores of 580.

• Keep your debt-to-income ratio below 43%. Lenders will calculate your DTI based on both mortgage payments to ensure you can afford both.

• Meet all other FHA loan requirements for credit, income, assets, and down payment. Using FHA financing before doesn’t guarantee approval again.

• Sell your current home first if the exceptions don’t apply to you. You’ll need to pay off your old FHA loan before getting another.

• Consult a lender to assess your situation and eligibility for another FHA mortgage. They can guide you through the process.

Alternatives to Multiple FHA Loans

If your circumstances don’t allow for getting another FHA loan just yet, here are some potential alternatives to consider:

• Conventional mortgage: You may qualify for a conventional loan with today’s credit and finances even if FHA was your only option previously.

• FHA streamline refinance: If you want to adjust your existing FHA loan’s rate or term, a streamline refinance is an easy option that doesn’t require an appraisal.

• Cash-out refinance: You can tap equity in your current home via an FHA cash-out refi rather than buying another property.

• Home equity loan/line: A home equity loan or HELOC can provide funds using your current home as collateral if you need money for other purposes.

The Bottom Line

While you can absolutely get an FHA loan more than once over your lifetime, you generally can only have one FHA mortgage open at a time. This ensures borrowers use the lending program for primary residences rather than real estate investing.

But exceptions do exist for special circumstances like job relocations and divorce. And there are alternatives like conventional loans and refinancing if another FHA mortgage doesn’t work right now.

The key is to understand the rules around multiple FHA loans, and to consult a lender who can advise if you qualify for another FHA mortgage or not. With the right information and guidance, FHA financing can work for you throughout various stages of life and homeownership needs.