Two FHA Loans At The Same Time Mortgage Guidelines

Two FHA Loans At The Same Time Mortgage Guidelines

This BLOG On Two FHA Loans At The Same Time Mortgage Guidelines Was UPDATED On January 13th, 2019

Two FHA Loans At The Same Time Mortgage Guidelines

FHA Loans are intended for owner-occupied primary residences.

  • There are instances where homeowners can get a sudden job relocation to a location where it is beyond commuting distance
  • On a case where a homeowner currently has a FHA Loan and has a job transfer that is at least 100 or more miles from their current residence
  • If the above holds true, they can qualify for Two FHA Loans At The Same Time:
  • FHA mortgages is not intended for second homes, vacation homes, nor investment homes
  • Since a homeowner lives mainly at their owner-occupied primary residence, HUD, the parent of FHA, only restricts home buyers to only one FHA loan at one time
  • However, there are exceptions and there are times where homeowners can have Two FHA Loans At The Same Time

Purpose For 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. FHA Loans is the most popular loan program in the United States.

  • A home buyer can qualify to become a homeowner with as little as a 3.5% down payment with a 580 credit score
  • Home Buyers can qualify for FHA Home Loans with outstanding collections and charge offs without having to pay off the outstanding balance
  • Home buyers with not so perfect credit can qualify for FHA Loans
  • The main purpose of FHA Loans is to help promote owner occupied home ownership and not investment properties nor second homes
  • There are exceptions to this having Two FHA Loans At The Same Time

How To Qualify For Multiple FHA Loans

How To Qualify For Multiple FHA Loans

There are certain exceptions to having more Two FHA Loans 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 home loan
  • But not Two FHA Loans At The Same Time
  • The deal needs to make sense in order to have a new owner occupant property
  • For example, here is a case scenario:
    • if the homeowner is moving from a one bedroom condominium to a single family home
    • reason is because he or she has children who are outgrowing their home
    • the deal makes sense to qualify for the new home purchase to be an owner occupant home
  • 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 the home buyer has a real estate listing contract that they are selling their current home
  • Borrower on the second home purchase need to qualify for both mortgages
  • BUT CANNOT HAVE Two FHA Loans At The Same Time
  • If the exiting property is a FHA Loan, the new owner occupant home purchase needs to be conventional 
  • The homeowner can also keep the first property with the FHA mortgage loan as an investment property
  • If they have at least a 75% Loan to Value (LTV) on the exiting property, then they can use 75% of the potential rental income on the departing residence

Borrower Relocates To A Different Area

Borrower Relocates To A Different Area

Borrowers is allowed to have a second FHA loan if they are moving to another area due to job relocation. The new job is more than 100 miles and beyond commuting distance from their current owner occupied primary residence. On cases where the homeowner with a FHA Loan gets a job transfer, this person can have Two FHA Loans At The Same Time:

  • It normally needs to be at least 100 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, borrower needs to qualify for both mortgages to qualify for the new FHA loan
  • This holds true 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 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 can qualify for a FHA Loan for their own home purchase
  • The debt to income ratio on the co-signed loan will not count as long as the main borrower can provide proof that they have been making payments for the past 12 months and NOT the co-borrower
  • Non-occupant co-borrowers are 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 Guidelines FOR Two FHA Loans At The Same Time

FHA Guidelines FOR Two FHA 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 need 75% of potential rental income from exiting home to qualify for new mortgage,  FHA requires that the first home have a 75% Loan to Value or lower
  • The potential rental income is derived by a home appraisal
  • The appraisal will determine the LTV
  • If loan to value is higher than 75% LTV, the homeowner can 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

Home Buyers needing to qualify with direct lender with no overlays on government and conventional loans, please contact Gustan Cho Associates at Loan Cabin Inc. at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

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