You can have more than one loan backed by the Federal Housing Administration (FHA). You’ll need to follow strict rules about living in each home as your primary residence, however, which may limit how many FHA loans you can have.
The Federal Housing Administration (FHA) backs mortgage loans with favorable terms to help borrowers with low down payments or less-than-perfect credit purchase a home. But while you can get multiple FHA loans over your lifetime, having more than one at the same time is generally not allowed.
Why FHA Imposes Limits
The FHA insures lenders against losses on mortgages that meet their program guidelines This allows lenders to offer mortgages with lower credit score requirements and down payments as low as 35%. However, in exchange for these perks, the FHA prohibits borrowers from using multiple FHA loans at once to purchase investment properties or vacation homes.
The FHA wants to promote sustainable homeownership by helping creditworthy borrowers purchase a primary residence. Allowing borrowers to have multiple FHA mortgages concurrently could overextend them financially and increase defaults. It would also open the door for investors to take advantage of FHA’s lenient terms.
The One Mortgage Rule
While you can qualify for multiple FHA loans over your lifetime, generally you can only have one FHA mortgage at a time. This “one mortgage rule” applies even if the additional property you want to buy would be your new primary residence.
Exceptions are only made in limited cases where clearly warranted. You must fully pay off your existing FHA loan or refinance into a non-FHA loan before getting another FHA mortgage, with few exceptions.
When Multiple FHA Loans Are Allowed
Here are some examples of situations where the FHA may grant exceptions to finance more than one property
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Relocation: If you need to move for a new job opportunity but are unable to sell your current home, the FHA may allow you to buy in the new location with a second FHA loan.
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Divorce: If divorcing spouses are awarded different FHA-financed homes, the FHA makes exceptions to prevent displacing either party.
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Family size increase: You may qualify for a second FHA loan if your family has outgrown your current FHA-financed property.
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Non-occupant co-borrower: You can be a co-signer on someone else’s FHA loan while still having your own. But you’re liable for both mortgages if they default.
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Refi into investment property: You may be able to get a new FHA loan for a primary residence while refinancing the old home into a rental property with an FHA streamline refi.
In most cases, you’ll need at least 25% equity in the original property to qualify for a second FHA mortgage. And the lender will count both mortgage payments against your debt-to-income ratio.
Alternatives to Multiple FHA Loans
If your situation doesn’t warrant an FHA exception, here are some alternatives that allow you to buy another home before paying off your FHA loan:
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Conventional 97 mortgage: Requires just 3% down with flexible credit standards, similar to FHA.
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FHA streamline refinance: You can refinance your current FHA mortgage into a new FHA loan to remove someone from the loan or lower your interest rate.
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Home equity loan: If you have sufficient equity, you may be able to tap it to help fund the down payment on a conventional purchase loan or pay off your FHA mortgage.
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Cash-out refinance: You can refinance your FHA loan for more than you owe and use the proceeds to pay off the mortgage.
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Sell your home: Pay off your FHA loan by selling your property and using the sale proceeds to pay off the mortgage.
Qualifying for Multiple FHA Loans
If you’re in a situation where an FHA exception may apply, here are some tips for qualifying:
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Credit score: The minimum FICO score is 580 for 3.5% down and 500 for 10% down. Many lenders require scores of at least 620.
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Down payment: At least 3.5% of the purchase price is required. You may need 10% or more if your credit score is below 580.
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Debt-to-income ratio: Total monthly debt payments, including both mortgages, typically cannot exceed 43%.
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Mortgage insurance: Upfront and annual mortgage insurance premiums apply on each FHA loan.
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Reserves: Lenders often want to see 2-6 months of mortgage payments in reserves for each FHA mortgage.
Meeting the qualifications for multiple FHA loans can be challenging. Be sure to shop around with several lenders to optimize your chances.
The Bottom Line
The FHA allows borrowers to have multiple FHA mortgages over their lifetime but generally only one at a time in order to purchase a primary residence. This rule aims to prevent misuse and overextension while promoting sustainable homeownership. Make sure you understand the restrictions and alternatives before seeking more than one FHA loan at once. An exception may be possible but can require substantial equity and excellent credit.
Alternatives to taking out multiple FHA loans
If you’re not eligible for another FHA loan but still need a low-down-payment mortgage, there are other options available.
Can you get an FHA loan twice or more?
FHA loans are typically restricted to buyers who plan to live in the home they purchase. However, FHA guidelines do allow you to borrow multiple FHA loans — but only in very specific situations.
You can purchase multiple homes with FHA loans under the following circumstances:
- You’re relocating for a new job opportunity. This is common if your new job takes you to a different state and you haven’t been able to sell your current home.
- Your new home is more than 100 miles away from your current FHA-financed home. The FHA loan is meant for homeowners, not real estate investors. This rule helps discourage investors from buying multiple homes through an FHA lender and taking advantage of the low 3.5% down payment, compared to the 15% to 25% down payment required for investment property purchases.
- You need a bigger home for a growing family. You’ll need to prove you have at least 25% equity to get a second loan for an increase in your family size. That could mean paying the mortgage balance down to 75% of your home’s value, or choosing a different loan type, like a conventional loan.
- You’re getting a divorce and your spouse is staying in the current home. If your divorce decree shows the home has been awarded to your spouse, the lender may make an exception for you to get a new home with an FHA loan.
- You’re cosigning an FHA loan. If you just want to cosign a new FHA loan without being a co-borrower, you can do that — you’ll have to sign the mortgage note but you won’t have to take title. If you already have an FHA loan and want to become a co-borrower on a new FHA loan, you may be required to make at least a 25% down payment.
- You were a co-borrower for someone else’s FHA loan but want to buy your own home now. The only catch with this option is you’ll have to qualify for your new loan with the other payment counted against you, unless you can document that the payments were made by the person you cosigned with.
- You’re buying a HUD real-estate owned (REO) property. Unlike other home types, which require a buyer to also be an occupant, you can use an FHA loan to purchase a home that was foreclosed upon by the FHA.
CAN YOU BUY A FORECLOSED HOME WITH AN FHA LOAN?
Properties that were purchased with FHA loans but then foreclosed upon, also known as HUD homes, are often sold “as-is” and at a discount (below market value). They’re popular with real estate investors but are primarily intended to serve low-income families, which is why they’re made available to owner-occupant buyers first. However, if they don’t sell within a certain time period, investors will eventually get a chance to bid on them as well. Investors can use an FHA loan but are required to put 25% down.
How many FHA Loans can you have?
FAQ
Can I get another FHA loan if I already have one?
Can I get an FHA loan if I already have a conventional loan?
Can you get another FHA loan if you sold your house?
What is the maximum you can finance with FHA?
How many FHA loans can you take out at a time?
But, in most cases, it’s no more than one at a time. That’s because the FHA wants borrowers to use the FHA loan to buy a primary residence. The Federal Housing Administration doesn’t want borrowers to take advantage of the loan’s relaxed requirements and take out multiple FHA loans to purchase investment properties.
How many FHA loans can you get in a lifetime?
FHA loans help borrowers purchase primary residences. While there’s no limit to how many FHA mortgages you can get during your lifetime, you can generally only have one FHA loan at a time because you can only have one primary residence.
Can you have more than one FHA mortgage at a time?
One “downside” to FHA loans is that – under most circumstances – you can only have one FHA mortgage at a time. While there are a few specific exceptions to the rule, you should explore alternative financing options if you’re trying to break into real estate investing.
Can I get multiple FHA loans in my lifetime?
You can get multiple FHA loans in your lifetime. However, you’re generally limited to one loan at a time unless you have an extenuating circumstance.
Can you take out more than one FHA loan?
You can take out more than one FHA loan during your lifetime. But, in most cases, it’s no more than one at a time. That’s because the FHA wants borrowers to use the FHA loan to buy a primary residence.
Can I have multiple FHA loans at the same time?
However, it’s entirely possible to have multiple FHA loans at the same time, provided that you fit into one of the circumstances that qualify as an exception to the rule of a single FHA loan at a time, you have enough equity, you can use rental income and your DTI is low.