How Often Can You Use An FHA Loan?

The FHA loan program helps make homeownership attainable for buyers who may not qualify for conventional financing. With low down payments and flexible credit requirements FHA loans open the door for many first-time homebuyers as well as repeat buyers. But can you tap into FHA financing over and over again?

While there’s no limit on the number of FHA mortgages you can obtain during your lifetime you’re typically restricted to having just one FHA loan at a time. This prevents the FHA loan program from being abused to purchase investment properties. Let’s take a closer look at how often you can use an FHA loan.

You Can Get Multiple FHA Loans, But Only One at a Time

The Federal Housing Administration doesn’t restrict how many times you can get an FHA mortgage. Whether you’re a first-time buyer or you’ve financed homes with FHA loans in the past, you can continue turning to FHA mortgages.

However, the FHA intends for borrowers to use FHA financing to purchase their primary residence where they’ll live. As a result, you usually can’t have more than one FHA mortgage at the same time.

Having two FHA mortgages simultaneously would mean you have two primary residences at once. This violates the spirit of the FHA loan program.

There are some exceptional cases where borrowers can qualify for two FHA mortgages, which we’ll cover. But generally, you can only have one FHA loan until you sell the property or pay off the mortgage.

Exceptions Allowing Two FHA Loans

While most borrowers are limited to one FHA loan at a time, you may qualify for a second FHA mortgage if:

• You’re relocating for a new job or affordable housing isn’t available near your new workplace
• You’re leaving a jointly owned home due to divorce and need to purchase a new residence
• You co-signed an FHA loan to help someone else buy and now want your own home
• Your family size has increased substantially and your current home no longer meets your needs

For the last exception, you’ll also need at least 25% equity in your current FHA-financed property to qualify for a second mortgage. This ensures you have enough of your own funds invested.

Provided you meet one of these exceptions, there’s no mandatory waiting period before getting another FHA loan. But qualifying for two mortgages can be challenging.

Qualification Requirements for Multiple FHA Loans

To get approved for a second FHA mortgage, you’ll need to prove you can handle two monthly mortgage payments. This means meeting strict debt-to-income and savings requirements.

Debt-to-Income Ratio

Most lenders want your debt-to-income ratio (DTI) below 43% to qualify for an FHA loan. DTI compares your total monthly debts to your gross monthly income.

With two mortgage payments, it’s easy to exceed a 43% DTI. And even a higher 50% DTI permitted on some loans may be out of reach.

Down Payment

On top of your ongoing mortgage payments, you need to come up with two FHA down payments. This requires 3.5% down on each loan for borrowers with a 580+ FICO credit score. Those with 500-579 scores need 10% down.

Cash Reserves

On top of down payments, lenders want to see you have savings equal to a few months of mortgage payments. This ensures you have a financial cushion in case of job loss or other financial disruption.

Mortgage Insurance

All FHA borrowers pay mortgage insurance premiums, adding to the cost of multiple FHA loans. There’s an upfront fee of 1.75% of the total loan amount and ongoing monthly premiums.

As you can see, qualifying for two FHA mortgages is no easy feat. Make sure you can truly afford the payments and meet all requirements first.

Alternatives If You Can’t Get Two FHA Loans

If getting two FHA loans at once isn’t feasible, you have alternatives:

• Apply for a non-FHA mortgage – Consider a conventional mortgage for your second home if you don’t qualify for two FHA loans simultaneously. But high debt levels may still pose an obstacle.

• Wait to apply for another FHA loan – Pay off your existing FHA mortgage first before applying for a second one. This avoids juggling two monthly payments.

• Sell your current home first – Use proceeds from the sale to pay off your initial FHA loan. This can make getting approved for a new FHA mortgage much easier.

How Long to Wait Between FHA Loans

Provided you meet one of the exceptions for a second mortgage, there’s no mandatory waiting period between FHA loans. You can get approved for another FHA mortgage right after closing on the first.

But unless your circumstances align with limited exceptions, owning two FHA-financed homes at once isn’t allowed. You’ll need to wait until you sell or pay off the initial mortgage.

This indirectly creates a waiting period between multiple FHA loans for most borrowers. However, some may choose to refinance into a conventional mortgage then get another FHA loan sooner than possible otherwise.

The Takeaway

While FHA mortgages can be used multiple times, it’s uncommon to have two FHA loans simultaneously. The exceptions allowing two FHA mortgages are narrow and qualification can be challenging. For most homebuyers, it makes sense to wait and apply for another FHA loan only after paying off their current one. But know that you can tap into FHA financing as often as needed throughout your homebuying years if used properly.