[et_pb_section fb_built=”1″ admin_label=”section” _builder_version=”4.16″ global_colors_info=”{}”][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Text” _builder_version=”4.23.4″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”]
Buying a second house when you already own one isn’t something FHA loans typically allow, but there can be 2nd FHA loan exceptions.
At the Wendy Thompson Lending Team, we can help you get a second FHA loan as a second-time homebuyer. Here’s what you must know.
You can get a second FHA loan if you relocate for a new job, move at least 100 miles away, have a bigger family, leave a jointly owned property, or co-signed on someone else’s FHA loan before.
Buying a new home when you still have an existing mortgage can be tricky You may be wondering – can I get an FHA loan if I already own a home?
The short answer is yes you can qualify for an FHA loan even if you currently have a mortgage. However, there are some specific requirements and limitations to be aware of.
In this article, we’ll explain:
- What an FHA loan is
- FHA loan requirements
- How FHA loans work when you already own a home
- Tips for qualifying for an FHA loan when you already have a mortgage
- Alternatives to an FHA loan
Let’s dive in!
What Is An FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration.
Some key features of FHA loans include:
- Low down payments – only 3.5% required for qualified buyers
- More flexible credit requirements than conventional loans
- Available for primary residences, investment properties, and in some cases secondary homes
- Offered by private lenders and backed by the federal government
The FHA insures the loan, so lenders can offer better terms to buyers who may not qualify for conventional mortgages.
FHA Loan Requirements
To qualify for an FHA loan, you’ll need to meet certain requirements:
-
Credit score – At least 500 for 3.5% down, 580 for the best terms. The higher your score, the better.
-
Down payment – 3.5% of home purchase price if your credit score is 580+
-
Debt-to-income ratio – Typically, less than 43% of gross monthly income
-
Home appraisal – Property must be appraised by an FHA-approved appraiser
-
Owner occupancy – You must intend to occupy the property as your primary residence
-
Mortgage insurance – Upfront and annual mortgage insurance premiums required
-
Loan limits – Vary by county but max out at $970,800 for high cost areas in 2023
-
Home inspection – Property must pass an FHA compliance inspection
-
Existing mortgage – Must be current on payments, with no late payments in past 12 months
The existing mortgage requirement is key for homeowners with a current loan. Let’s look at that requirement more closely.
How FHA Loans Work If You Already Own A Home
When applying for an FHA loan on a new property when you already have a mortgage, you’ll need to meet some specific qualifications.
Here are the key criteria to be eligible for an FHA loan if you currently own a home:
-
You must be current on your existing mortgage payments – no late payments in the past 12 months
-
Your current home loan must have a strong payment history overall
-
Your total monthly mortgage payments cannot exceed FHA guidelines for debt-to-income ratio
-
You must qualify based on your full monthly obligations, including both mortgage payments
-
The new FHA loan must be on a primary residence that you intend to occupy
Additionally, the new property you wish to purchase will be subject to standard FHA appraisal and inspection requirements.
The bottom line is you can qualify for an FHA loan when you have an existing mortgage, but you must carefully manage your finances, credit, and current home loan payments.
Tips For Qualifying For An FHA Loan When You Already Own
If you want to qualify for an FHA loan on a new primary residence while still paying off your current mortgage, here are some tips:
-
Improve your credit score – Get your score as high as possible before applying to improve your chances. Pay down balances, dispute errors, and don’t take on new debt before applying.
-
Make payments on time – Being late on your current mortgage will disqualify you. Set payment reminders and autopay to avoid issues.
-
Pay down existing debts – The lower your DTI ratio, the better. Pay off credit cards and other debts so you can qualify for the new payment.
-
Pick the right property – Make sure the new home fits your budget. A more expensive house makes qualifying harder.
-
Save for a larger down payment – Putting 5-10% down can help your chances if your finances are tight.
-
Consult a mortgage professional – They can review your situation and provide tips tailored to your specific finances.
With proper planning and diligence, an FHA loan is feasible for many homeowners with an existing mortgage. But it’s critical to be responsible with your current home loan to be eligible.
Alternatives To An FHA Loan
An FHA loan is not your only option if you currently have a mortgage. Here are a few alternatives worth considering:
Conventional 97 Loan – Allows 3% down payment on primary residence like an FHA loan, but has fewer credit constraints. However, it requires mortgage insurance.
Cash-out Refinance – Refinance your current mortgage and take cash from the new loan amount for your home purchase.
Portfolio Loan – Non-conforming loan some banks offer themselves for specialized cases like yours. May have higher rates/fees.
Bridge Loan – Short-term loan to purchase new home while keeping existing mortgage. You later pay off the bridge loan or refinance into a single mortgage.
Home Equity Loan – Leverage equity in current home if you have enough built up already.
Carefully compare costs, terms, and your financial specifics when deciding the best loan product for your situation.
The Bottom Line
Yes, you can qualify for an FHA loan if you currently own a home and have an existing mortgage. But make sure you fully understand the program requirements and manage your current home loan responsibly. Work to improve your credit, lower debts, and avoid late payments. With proper preparation, an FHA loan can help you purchase a new primary residence while keeping your current mortgage.
Can You Get an FHA Loan If You’re Not a First-Time Homebuyer?
An FHA mortgage is a government-backed home loan with flexible guidelines. It has many benefits for borrowers:
- FHA loans have low down payment requirements starting at just 3.5%
- Borrowers only need a 580 credit score to qualify
- The FHA allows debt-to-income ratios of up to 50% in some cases
- The mortgage insurance premiums are low and affordable
It’s a great option for borrowers with less-than-perfect credit who can handle a mortgage loan.
But I know what you’re thinking…
Can I get an FHA loan if I already own a home?
The FHA loan has a first-time homebuyer reputation, but it’s not only for first-time buyers. Anyone who meets the FHA requirements may use an FHA loan to buy a home.
Since the FHA loan requirements are relaxed, most people find that it’s a great way to buy their first home, but it can be used on any home — even a second home if you already own one.
Who Qualifies as an FHA Loan Second-Time Homebuyer?
You are an FHA loan second-time homebuyer if you currently own a home with an FHA loan and want to buy another house using an FHA loan.
Just like first-time homebuyers, borrowers must meet second home mortgage requirements to qualify for an FHA loan. Typically, this includes credit scores and down payment amounts.
But there’s good news:
You aren’t penalized for being a second-time homebuyer when pursuing an FHA loan. You can get a second chance to buy your forever home.
The Good and BAD of FHA Loans | NEW FHA Loan Requirements 2023
FAQ
Can I use an FHA loan if I already bought a house?
What disqualifies you from an FHA loan?
Why would a home not qualify for an FHA loan?
Can you qualify for FHA twice?
Do you need a first-time home buyer to qualify for an FHA loan?
You don’t need to be a first-time home buyer to qualify for an FHA loan. FHA loans are popular with first-time home buyers because they have low down payment requirements and more lenient standards for credit scores and existing debt. However, you can still apply for an FHA loan even if you’ve owned a home before.
How do I qualify for an FHA mortgage?
To qualify for an FHA mortgage, you must verify your FHA loan eligibility and have a FICO score of 580 or higher with a down payment below 10 percent. You could get approved with a FICO score as low as 500 if you can make a 10% down payment, although many lenders do not allow this.
Can I get an FHA loan if I already own a home?
• It is possible to get an FHA loan if you already own a home. • FHA loans have specific requirements and guidelines, including occupancy rules. • You may be eligible for an FHA loan if you meet certain criteria, such as using the new property as your primary residence.
Who is eligible to apply for an FHA loan?
Anyone can apply for an FHA loan. They aren’t just for certain groups, income levels, or ZIP codes. For most buyers, FHA mortgages require a 3.5% down payment, making it one of the most lenient mortgage types available nationwide.