FHA Loan Requirements, Limits and Approval Tips
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How Many FHA Loans Can You Have?

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You can have more than one loan backed by the Federal Housing Administration (FHA). However, you’ll need to follow strict rules when living in each home as your primary residence, which may limit how many FHA loans you can have.

Can you get an FHA loan more than once?

FHA loans are typically restricted to buyers who plan to live in the home they purchase. However, FHA guidelines allow you to buy or refinance a home with an FHA loan more than once, in very specific situations.

How many FHA loans can you have if you’re buying a home?

You can purchase multiple homes with an FHA loan under the following circumstances:

  • You’re relocating due to a new job opportunity. This is common if your new job takes you to a different state and you haven’t been able to sell your current home. 
  • Your new home is more than 100 miles away from your current FHA-financed home. The FHA loan is meant for homeowners, not real estate investors. This rule helps discourage investors from buying multiple homes through an FHA lender and taking advantage of the low 3.5% down payment, compared to the 20% to 25% down payment required for investment property purchases.
  • You need a bigger home for a growing family. You’ll need to prove you have at least 25% equity to get a second loan for an increase in your family size. That could mean paying the mortgage balance down to 75% of your home’s value, or choosing a different loan type, like a conventional loan.
  • You’re getting a divorce and your spouse is staying in the current home. If your divorce decree shows the home has been awarded to your spouse, the lender may make an exception for you to get a new home with an FHA loan.
  • You were a co-borrower for someone else’s FHA loan but want to buy your own home now. The only catch with this option is you’ll have to qualify for your new loan with the other payment counted against you, unless you can document the payments made by the person you cosigned with.
  • You’re buying a HUD real-estate owned (REO) property. Investors need a 25% down payment to purchase homes that were foreclosed by the FHA, also known as HUD homes.

THINGS YOU SHOULD KNOW

FHA loans are popular with first-time homebuyers because they offer more flexible approval guidelines than conventional loans. For example, you only need a 580 credit score to make the minimum 3.5% down payment on an FHA loan. That’s lower than the 620 required for a conventional loan with a minimum down payment.

How many FHA loans can you have if you’re refinancing your home?

You can refinance more than one home with FHA financing, but at least one of the homes must be your primary residence. Any other homes with FHA loans must be refinanced as investment properties. You may be able to get a new FHA loan on an FHA-financed home you’ve since converted to an investment property, with the following restrictions:

THINGS YOU SHOULD KNOW 

If your credit scores have improved since you first borrowed an FHA loan on any FHA-financed home, you may want to check out conventional refinance options. An added bonus: Conventional lenders can offer investment property loans to eligible borrowers.

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 minimum mortgage requirements to qualify for an FHA loan based on your credit score, debt-to-income (DTI) ratio and down payment amount.

If you want or need to use rental income to offset the mortgage payment on an FHA-financed home you currently own, 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 you 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
  • Prove the new FHA-financed home you’re buying is a primary residence and is at least 100 miles away from your current FHA-financed home

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 options available.

Fannie Mae HomeReady® loans

Low-income borrowers with a minimum 3% down payment and 620 credit score may qualify for Fannie Mae’s HomeReady mortgage program.

Freddie Mac Home Possible® loans

The Home Possible down payment requirements and income limits are the same as the HomeReady program, but you’ll need a higher minimum credit score (660) to qualify.

VA loans

The U.S. Department of Veterans Affairs (VA) backs loans for eligible military borrowers and their spouses. No down payment or mortgage insurance is required. The VA doesn’t set a minimum credit score requirement, but many VA-approved lenders require a 620 credit score or higher.

USDA loans

Low- to moderate-income homebuyers in designated rural areas may be able to get no-down-payment financing with a loan guaranteed by the U.S. Department of Agriculture (USDA).

 

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