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How Many FHA Loans Can You Have?
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If you already own a home with a mortgage insured by the Federal Housing Administration (FHA), you might be wondering: How many FHA loans can you have? FHA loans are intended for homeowners to finance a primary residence, but you may be able to have multiple FHA loans in certain situations.
How many FHA loans can you have if you’re buying a home?
The FHA typically limits you to one FHA mortgage to buy a home within set loan limits for your area. However, under FHA loan guidelines you can purchase another home with an FHA loan in the following circumstances:
- You’re relocating due to a new job opportunity.
- Your new home is more than 100 miles from your current FHA-financed home.
- You need a bigger home to provide for a growing family.
- You’re getting a divorce and your spouse is staying in the current home.
- You were a co-borrower for someone else’s FHA loan and want to buy your own home.
- You’re not using FHA loans to build an investment portfolio.
- You’re buying a HUD real-estate owned (REO) property.
You’ll need to prove your current home has at least 25% equity to be eligible for a second FHA loan for an increase in your family size. If not, you’ll need to pay the principal balance down to 75% of the home’s value or choose a different type of financing.
Investors purchasing homes that were foreclosed by the FHA, also known as HUD REOs, need a 25% down payment.
How many FHA loans can you have if you’re refinancing a home?
Typically, you can refinance only one primary residence with an FHA loan. However, if you still own an FHA-financed home that you’ve since converted to an investment property, you may be able to refinance into a new FHA mortgage with the following restrictions:
- The other home must be refinanced using FHA streamline loan guidelines with no appraisal or income verification.
- The other home must be refinanced as an investment property.
- The new mortgage cannot be an adjustable-rate mortgage (ARM).
- A cash-out refinance to tap equity is not allowed.
How to qualify for multiple FHA loans
FHA-approved lenders will review your loan application to make sure you have the ability to repay more than one FHA loan. You’ll need to meet the regular minimum FHA mortgage requirements for your credit score, DTI ratio and down payment.
If you want or need to use rental income to offset the payment on a home you currently own with an FHA loan, you’ll need to:
- Provide tax returns that show you’ve received rental income over the past two years
- Verify the date the home was purchased if you don’t have a two-year rental income history
- Provide a rental income analysis from an appraiser to verify the market rents near the home
- Prove you have 25% equity in the home your currently own if you have no rental income history
- Provide a copy of the lease and proof you received a security deposit and first month’s rent
Alternatives to taking out multiple FHA loans
If you’re not eligible for another FHA loan but still need a low down payment mortgage, there are other home loan options available.
Fannie Mae HomeReady® loans
The HomeReady program allows low-income borrowers to buy homes with a 3% down payment and a minimum 620 credit score.
Freddie Mac Home Possible® loans
The Home Possible loan features the same down payment and income limits as the HomeReady program, but requires a higher minimum credit score (660).
Low- to moderate-income homebuyers in designated rural areas may be able to buy a home with a loan guaranteed by the U.S. Department of Agriculture (USDA). No down payment is required and 640 is the minimum credit score.
The U.S. Department of Veterans Affairs (VA) backs loans for eligible military borrowers and their spouses, and no down payment or mortgage insurance is required. While the VA doesn’t set a minimum credit score requirement, most VA-approved lenders who offer the loans require a credit score of 620 or higher.