There’s no limit to how many FHA loans you can qualify for in your lifetime, but the general rule is that you can only have one at a time… unless you meet certain exceptions.
If you bought your current home with a loan backed by the Federal Housing Administration (FHA), the idea of whether you can get a second FHA mortgage to buy a new home one day might have crossed your mind.
While there’s no limit to how many times you can qualify for an FHA loan in your lifetime, you can only have one at a time unless you meet specific exceptions. It’s a big decision to make, so let’s break down the details of FHA loans, how you can qualify for more than one loan at a time, and whether taking out multiple FHA loans is the best option for you.
Can I get an FHA loan more than once?
You can get multiple FHA loans throughout your life. However, the general rule is that you can only have one FHA loan at a time.
This rule makes sense when you remember that FHA loans are intended for home buyers who want to use their property as their primary residence. You can’t use an FHA loan to purchase a vacation home or a rental property.
Generally, if you want to get another FHA loan, you’ll need to pay off the first one before applying for the second.
However, there are exceptions to that rule. You may be eligible to get another FHA loan without having to sell the first FHA-financed home, if:
Your new home is more than 100 miles from your current house.
Have you heard of the FHA 100-mile rule? You can qualify for a second FHA loan if you’re moving to another area because of a new job opportunity, but it must be at least 100 miles away.
Your family has grown significantly since you bought your home.
Imagine you originally bought a two-bedroom house, but your family now has five children (That’s a little cramped!).
You’re a co-borrower on an FHA loan, but you want to buy your own property.
This typically happens in instances of divorce.
You’re buying a HUD real-estate owned (REO) property.
If you’re looking to invest in an FHA-foreclosed home, you’ll need to provide a 25% down payment.
You can get multiple FHA loans throughout your life. However, the general rule is that you can only have one FHA loan at a time.
How can I qualify for multiple FHA loans?
Obviously, your lender will want to know you can afford to repay more than one home loan.
Like you did for your first FHA loan, you’ll need to meet the minimum credit score, debt-to-income ratio, and down payment requirements to qualify. And, your lender will, of course, check your income and assets to determine your eligibility. You’ll need to be clear of any foreclosures for at least three years to qualify for another FHA loan.
Depending on your credit score, you could put down as little as 3.5%. Keep in mind, you’ll need to pay mortgage insurance throughout the life of each of your FHA loans.
If the reason for your second FHA loan is to accommodate your growing family, you’ll need to provide evidence that your current home doesn’t meet your needs anymore. In this case, you’ll need to have at least 25% equity in your current home to be eligible for a second FHA loan. If not, you’ll either have to pay the principal balance down further, or use other loan financing.
What is the difference Between FHA and Conventional Home Loans?
What are the alternatives?
If you don’t want to hold two FHA loans at the same time, there are other options to consider. You could:
- Sell your current home
- Refinance your current home to (or buy your new home with) a Conventional loan
- Rent or lease a new home until your current home sells
- Buy a new home with another loan type
If you need flexible qualification standards, a USDA loan can get you in a home in a rural area with no down payment requirement.
What’s next?
FHA loans can be a smart choice, whether you’re looking to buy or even refinance your current loan. FHA loans are especially popular with first-time home buyers because of their flexible credit, income, and down payment requirements. If you’re interested in learning more about FHA loans, contact us today to chat with one of our knowledgeable loan originators. Or see what’s possible by starting with a free rate quote!
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