How Many Times Can You Use An FHA Loan?

Getting an FHA loan can be an excellent way for many homebuyers to achieve the dream of homeownership. With low down payment requirements and flexible credit standards, FHA loans open the door for those who may not qualify for other types of mortgages.

However, you may be wondering – how many times can you actually use an FHA loan? Can you get more than one throughout your lifetime? Let’s take a closer look at the ins and outs of getting multiple FHA loans.

The Basics of FHA Loans

First, a quick refresher on what exactly FHA loans are and why they can be so useful for buyers. FHA stands for Federal Housing Administration – this government agency insures the loans, making them less risky for lenders.

Some key benefits of FHA loans include:

• Low down payments: Only 3.5% down required for borrowers with credit scores of 580 or higher. Even those with scores between 500-579 can qualify with 10% down.

• Flexible credit requirements: FHA approves borrowers starting at a 580 FICO score. Those with past credit issues like bankruptcy or foreclosure can still potentially qualify.

• Low monthly mortgage insurance FHA loans require mortgage insurance but rates are capped at competitive levels.

The tradeoff is that FHA loans can only be used to purchase a primary residence, not an investment property or vacation home. And there are limits on how many you can have at once

You Can Get Multiple FHA Loans Over Time

The good news is there is no lifetime limit to the number of FHA loans you can obtain. So you can get FHA financing to purchase your first home, use it again later to move up to a larger home as your family grows, downsize as you get older, and so on.

However, there is a big caveat – generally, you can only have one FHA loan at a time.

The FHA does not want borrowers abusing the program’s flexible credit standards and low down payments to buy multiple investment properties. So unless you meet special exception criteria, you can’t have two FHA mortgages simultaneously.

This “one FHA loan at a time” rule can cause issues if you want to buy another home before selling your current one. We’ll cover some possible workaround options later.

Exceptions That Allow Multiple Simultaneous FHA Loans

While rare, there are some exceptions where you may qualify for a second FHA loan before paying off your existing one. These include situations like:

• Relocation for a new job: If your new job requires you to move beyond a reasonable daily commute from your current home.

• Divorce: When divorcing spouses split up a jointly owned home, one spouse may qualify for a new FHA mortgage on their own.

• Increased family size: If you can prove your family has substantially grown and your current FHA home no longer meets your needs. At least 25% equity is also required.

• Co-signing for someone else: If you co-sign an FHA loan to help another borrower qualify, you can still potentially get your own FHA mortgage.

In cases like these, borrowers may get simultaneous FHA loans approved. But it’s still an uphill battle – lenders will heavily scrutinize your income, debts, and assets to confirm you can truly afford two mortgages.

Qualifying Standards for Multiple FHA Loans

Even if you meet an exception for two FHA loans, lenders will still hold you to high standards before approving your second mortgage. Key criteria include:

• Debt-to-income ratio: Total monthly debts (including both mortgage payments) typically cannot exceed 43% of your gross monthly income. A higher ratio up to 50% may occasionally get approved if other factors are strong.

• Down payment funds: You’ll need cash to cover any required down payment on the second home purchase. FHA loans need at least 3.5% down for buyers with 580+ credit scores.

• Cash reserves: Most lenders require reserves equal to two monthly mortgage payments. This provides a buffer in case of job loss or other financial hardship.

• Mortgage insurance: All FHA borrowers must pay an upfront mortgage insurance premium of 1.75% of the total loan amount, plus ongoing monthly premiums.

As you can see, the bar is high for qualifying for simultaneous FHA loans. You must have an exceptionally strong financial profile.

Alternatives If You Can’t Get Two FHA Mortgages

For most borrowers, getting two FHA loans at once is unrealistic. But there are alternatives if you need financing for a second home before selling or paying off your current one.

• Conventional loan for the second property: If you now have strong credit and equity, you may qualify for a non-FHA mortgage for your next home.

• Sell first, buy second: Sell your current home first, pay off the FHA loan, then apply for a new FHA mortgage. This ensures you only have one loan at a time.

• Cash-out refinance: Refinance your current FHA loan and take cash out to use as a down payment on the new home. Make sure your lender allows this.

• Home equity loan: A home equity loan or line of credit can provide funds for a down payment on a new house. But it also means having two simultaneous loans.

Each option has pros and cons to weigh based on your specific financial situation. Speaking with a mortgage professional can help you identify the most strategic approach.

The Takeaway

While FHA loans provide a great avenue to homeownership, you generally can’t have more than one at the same time – with limited exceptions. This restricts how buyers can use these government-backed mortgages.

But the good news is you can always get another FHA loan in the future after paying off your current one. So FHA financing remains available throughout your home buying life journey if needed. Just be strategic about managing the “one loan at a time” constraint.