How Many FHA Loans Can You Have at Once?

Prospective homebuyers looking for an affordable loan with low down payment options may be considering Federal Housing Administration (FHA) loans. Having more than one FHA loan at a time is possible, but essential factors must be considered before applying.

This article will explore the requirements and restrictions of having two FHA loans simultaneously.

Readers will learn what circumstances allow them to pursue this option and its potential benefits and drawbacks.

When Can You Get a Second FHA Loan?

As an FHA loan holder, you may be able to secure a second one if you can demonstrate that your current property with the existing FHA loan is your primary residence. To obtain a second FHA loan, prove that your home is your primary living space, even if you already have an FHA mortgage or loan.

Acquiring another FHA loan is similar to getting any other mortgage, as long as you meet the requirement of having your current home as your primary residence. Therefore, before pursuing a second FHA loan, ensure that your existing home is your primary residence.

If so, you can start investigating the possibility of securing a second FHA loan.

What are the eligibility requirements for two FHA loans?

To determine eligibility for two FHA loans, you must meet specific criteria set forth by the Federal Housing Administration. First, you must demonstrate a proven ability to manage mortgage debt by making timely payments on your existing FHA loan.

Additionally, you must have a compelling reason for taking out a second FHA loan, such as purchasing a new primary residence while retaining ownership of your current home. Furthermore, you must meet the FHA's minimum credit score and income requirements, and your total debt-to-income ratio must be within their limit.

You must fulfill these essential eligibility requirements to obtain two FHA loans.

1. Increase in Family Size

A borrower(s) may be eligible for a second home with an FHA-insured mortgage if the borrower(s) can show that: the borrower's legal dependents have grown and the house does not meet their needs; based on the outstanding FHA mortgage balance and a recent home assessment, the current primary residence's loan-to-value (LTV) ratio is equal to or less than 75 percent or has been paid down to that level.

The FHA underwriter may request documentation of an increase in the number of dependents and the inability of your current house to meet your family's needs.

2. Exception for Non-Occupying Co-Borrower

Non-occupant co-borrowers on a current FHA-insured mortgage may be eligible for a second FHA-insured mortgage on a new principal home.

Borrowers having an FHA-insured mortgage on their principal residence may be eligible to co-borrow as non-occupying co-borrowers on several FHA-insured mortgages.

This loophole permits non-resident cosigners to cosign several loans—one for the son and one for the daughter.

3. Exception for Relocation for Employment

An FHA-insured borrower may not be required to sell their prior FHA-insured mortgage if they meet the following criteria:

has created, or is establishing, a new primary home more than 100 miles from the borrower's present (principal) residence;
and is relocating for employment-related reasons.

As long as the move meets the first two conditions, the borrower doesn't have to live in the original house when they move back to the area. Instead, they can get a new FHA-insured mortgage on a new primary residence.

4. Vacating a jointly owned property

The borrower may be eligible for a second FHA-insured mortgage if they vacate (without intending to return) the principal residence that an existing co-borrower will occupy.

This exemption is often used in divorces where one spouse moves out and purchases a new residence.

Second Home FHA Loan Requirements

In addition to meeting one of the conditions for a second home, the borrower must also meet the following guidelines:

A debt-to-income ratio of less than 43%
A credit score of 580 or higher
No recent bankruptcies or foreclosures
Proof that you can afford both loans if you're responsible for the first loan
Proof that you qualify for the exception to have a second FHA loan
Stable income and employment

How many FHA loans can you have?

When buying a home, you may have considered an FHA loan. The Federal Housing Administration insures these loans, potentially allowing you to qualify for a lower down payment and mortgage payment.

However, it is generally limited to just one FHA loan at a time. If you already own a home with an FHA loan and desire another one, specific requirements must be met, and the lender must approve your application.

You must also pay two separate mortgage insurance premiums and monthly payments. Nevertheless, if you fulfill the criteria, multiple FHA loans are possible.

Alternatives to Taking Out a Second FHA Loan

Several alternatives exist if you're exploring options for a second FHA loan.

Refinancing: If you've accumulated equity in your home, refinancing your FHA loan to a conventional loan with improved terms and a lower interest rate could be a wise move.
Home Equity Loan: By borrowing against the equity in your home, a home equity loan can be a practical solution if you need funds for various reasons, like consolidating debt, making home improvements, or even purchasing another property.
Personal Loan: With a fixed repayment schedule, an unsecured personal loan is a viable option if you're seeking a loan for various purposes like home upgrades, debt consolidation, or purchasing a second home.
Cash Out Refinance: By cashing out on the equity in your home, you could use the funds for debt consolidation, home renovations, or buying a second property via a cash-out refinance. However, it's typically at a higher interest rate and requires paying closing costs.

Regardless of your choice, compare rates and terms and determine if it fits you.

Conclusion

In conclusion, having two FHA loans simultaneously is possible under certain circumstances. To be eligible, you must prove that your current property is your primary residence and meet the eligibility criteria set forth by the Federal Housing Administration.

You may need a second FHA loan for several reasons, such as an increase in family size, a non-occupying co-borrower, relocation for employment, or vacating a jointly owned property. If you fulfill the criteria, you can investigate the possibility of securing a second FHA loan.

However, if it's not possible or desirable, alternatives like refinancing, home equity loans, personal loans, and cash-out refinancing should be considered. Always do your due diligence and consult a professional before making a decision.

SOURCE:

https://www.hud.gov/buying/loans
https://www.wellsfargo.com/mortgage/loan-programs/low-down-payment/