You may be asking, Can I have 2 FHA loans at the same time? We have many clients that current own a home that they purchased using FHA financing and now, for whatever reason, want to upgrade their home and move into a new home. This process can be quite difficult if you do not have your current home sold yet or if you plan to keep it and rent it out.
In general, a borrower may have only one FHA mortgage loan at one time. If at some point they want to obtain another FHA loan then the first one needs to be paid off before applying for another one. However, there are exceptions to that rule according to The Department of Housing and Urban Development (HUD). They will allow a borrower to have two FHA loans but only under certain circumstances such as a bigger family size or because of job relocation.
Although the general rule only allows a borrower to have one FHA loan at a time, HUD also allows borrowers to have multiple government insured mortgages under the right circumstances, depending on their individual situations and what has changed since the close of their first FHA loan.
Exceptions to have more than one FHA Loan
If a borrower finds themselves needing to relocate to a different area, they may be able to obtain another FHA loan if relocating would result in an unreasonable commute to their existing home. One example of needing to relocate would be for a new job. HUD has not determined what an unreasonable commute would be so it makes it a bit tricky and on a case by case situation. Most lenders say anything over an hour commute would be deemed reasonable.
Another reason a borrower may be allowed to obtain a second FHA loan is if their family size has grown significantly since their first home purchase. The borrower first needs to prove that their existing living conditions no longer can meet the needs of their growing family. Such as if they currently have a two-bedroom home but the family triples in size, then they will probably qualify for another FHA loan.
Requirements to have 2 FHA Loans
Of course, even if a borrower can qualify under one of these two exceptions, there is still one big hurdle they need to overcome first. The borrower’s debt-to-income needs to support paying two mortgage payments, unless their current home has at least 25 percent equity, then rental income can be included in some circumstances (This must be documented with an appraisal). If there home has less then 25 percent equity they will not be able to use rental income and therefore may not qualify with their DTI.
What are the Alternatives to having Multiple FHA Loans?
Alternatives to having two FHA loans at the same time would be to use conventional financing. A conventional loan, however, will be slightly more strict on credit scores and may require a slightly larger down payment (between 5-20 percent down). It is worth asking your loan officer if this may be an alternative option to having two FHA mortgages.
Alternatives to Multiple FHA Loans Include:
- Selling your current home
- Refinancing your current home to a Conventional Home Loan
- Buying a new home with a Conventional Mortgage Loan
- Buying a new home with USDA Rural Development Financing
- Get a cosigner to sign with you for your new mortgage
- Buy on Land Contract
- Rent or Lease a new Home until your home Sells
Every borrower’s situation is different and it can sometimes be difficult to fit into the specific guidelines set by HUD, but as long as you have enough equity and can use rental income or have a low DTI along with fitting into one of the two exceptions, it is possible to have more than one FHA loan at a time.
Get Information on Multiple FHA Mortgages
To get information on buying a home with FHA financing while you already have an FHA loan call us at 1-800-555-2098 or submit a request below.