Can I Have Two FHA Loans At The Same Time?

FHA Loans are intended for owner occupied primary residences.  It is not intended for second homes, vacation homes, nor investment homes.  Since a homeowner lives mainly at their owner occupied primary residence, FHA only restricts you to only one FHA loan at one time.  However, there are exceptions to this rule.

FHA Loans:  Purpose For FHA Loans

The Federal Housing Administration created FHA Loans to assist hard working Americans become homeowners with very little money down and generous lending guidelines.  A home buyer can qualify to become a homeowner with as little as a 3.5% down payment and not so perfect credit.  The main purpose of FHA Loans is to help promote owner occupied homeownership and not investment properties nor second homes.  There are exceptions to this one FHA Loan rule.

Multiple FHA Loans:  Exception To Just One FHA Loan

There are certain exceptions to having more than one FHA Loan at the same time.  If a homeowner currently has a FHA Loan and needs to upgrade to a larger home than the one he is living in, then they can have another FHA Loan.  The deal needs to make sense.  For example, if the homeowner is moving from a one bedroom condominium to a single family home because he or she has children who are outgrowing their home, the deal makes sense.  However, if the homeowner is moving from a 3 bedroom home to a 4 bedroom home, the case does not make sense and the deal will most likely be scrutinized.    On cases like these, the mortgage lender might require that you have a real estate listing contract that you are selling your current home.  You as the mortgage loan borrower on the second FHA home purchase need to qualify for both mortgages.  You can also keep the first property with the FHA mortgage loan as an investment property if you have at least a 75% Loan to Value.

Multiple FHA Loans Allowed:  If Borrower Relocates To A Different Area

A FHA mortgage loan borrower is allowed to have a second FHA loan if they are moving to another area where it is not within commuting distance from their current owner occupied primary residence.  It normally needs to be at least 60 or more miles.  Reasons for such a move can be a job transfer.  On cases like these, the borrower can keep their original home with the FHA mortgage loan as a rental or may opt to sell the home after the borrower moves into their new home.  In either case, the FHA mortgage loan borrower needs to qualify for both mortgages to qualify for the new FHA loan unless they have at least 25% or more equity in their first home and a lease agreement.  If this is the case, then a lease is necessary if they want to use 75% of their rental income to qualify for the new FHA mortgage loan.

You Can Have A Second FHA Loan If You Are A Co-Borrower On A FHA Loan

You can qualify for a second FHA loan if you are currently a co-borrower on a FHA loan.  Cases like these are common where a person is a co-borrower on a FHA loan but gets a divorce and leaves the household.  That person can qualify for a second FHA loan even though they are currently a co-borrower.  Non-occupant co-borrowers can qualify for a second FHA loan as long as they intend on occupying the property.  Non-occupant co-borrowers are FHA mortgage loan borrowers who have cosigned on a FHA loan for a family member to qualify for that family member’s mortgage but did not occupy the property.

FHA LOANS LENDING GUIDELINES FOR TWO FHA MORTGAGE LOANS AT THE SAME TIME

The Federal Housing Administration has set tough strict FHA lending guidelines for those who are seeking a second FHA loan.  For those home buyers who want to seek an upgrade and move to a larger home, FHA requires that the first home have a 75% Loan to Value or lower.  The way to prove this is that the homeowner needs to get an appraisal showing the appraised value and needs to pay down the balance so it is at a 75% Loan to Value or lesser.  For those who need to use the rental income of the first home with the FHA loan, then a rental lease agreement needs to be provided to the FHA mortgage underwriter and 75% of the monthly rental income can be used.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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