Can You Have Multiple FHA Loans at the Same Time?
You can have more than one loan backed by the Federal Housing Administration (FHA). You’ll need to follow strict rules about living in each home as your primary residence, however, which may limit how many FHA loans you can have.
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Can you get an FHA loan twice or more?
FHA loans are typically restricted to buyers who plan to live in the home they purchase. However, FHA guidelines do allow you to borrow multiple FHA loans — but only in very specific situations.
You can purchase multiple homes with FHA loans under the following circumstances:
- You’re relocating for 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 15% 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’re cosigning an FHA loan. If you just want to cosign a new FHA loan without being a co-borrower, you can do that — you’ll have to sign the mortgage note but you won’t have to take title. If you already have an FHA loan and want to become a co-borrower on a new FHA loan, you may be required to make at least a 25% down payment.
- 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 that the payments were made by the person you cosigned with.
- You’re buying a HUD real-estate owned (REO) property. Unlike other home types, which require a buyer to also be an occupant, you can use an FHA loan to purchase a home that was foreclosed upon by the FHA.
CAN YOU BUY A FORECLOSED HOME WITH AN FHA LOAN?
Properties that were purchased with FHA loans but then foreclosed upon, also known as HUD homes, are often sold “as-is” and at a discount (below market value). They’re popular with real estate investors but are primarily intended to serve low-income families, which is why they’re made available to owner-occupant buyers first. However, if they don’t sell within a certain time period, investors will eventually get a chance to bid on them as well. Investors can use an FHA loan but are required to put 25% down.
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:
→ The other home must be refinanced through the FHA streamline program, which doesn’t require a home appraisal or income verification.
→ The other home must be refinanced as an investment property.
→ The new mortgage can’t be an adjustable-rate mortgage (ARM) or cash-out refinance.
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. Conventional lenders can offer investment property loans to eligible borrowers. An added bonus: starting May 1, 2023, these loans will be more affordable for borrowers with an LTV under 70%.
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 at the same time. You’ll need to meet minimum mortgage requirements to qualify for an FHA loan based on your creditworthiness, debt-to-income (DTI) ratio and down payment amount:
Credit score580 with 3.5% down 500 with 10% down | DTI43% maximum for both loans combined | Down payment3.5% with 580+ credit score 10% with 500-579 credit score | CAIVRS checkNo delinquent federal debt |
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FHA rental income guidelines
If you want to use rental income to show lenders that you can afford the mortgage payment on an FHA-financed home you currently own, you’ll need to:
- Show that you’ve received consistent 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, if the property is not the property you purchased with an FHA loan, proof that you received a security deposit or 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
DO YOU NEED TO SHOW CASH RESERVES TO QUALIFY FOR AN FHA LOAN?
While you won’t have to show that you have a certain amount of cash in your bank account in order to qualify for an FHA loan — unless you’re purchasing a three- or four-unit property — your lender may take how much cash you have on hand into consideration when assessing how risky it might be to lend to you. Any cash reserves that came from a gift won’t count.
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 Fannie’s 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).
Frequently asked questions
Yes, you can buy land with an FHA construction-to-permanent loan as long as you intend to construct a home on it that you will occupy. You’ll have to choose land and a home design that meet the FHA’s minimum property standards, as well as use a licensed contractor or builder and have the property appraised by an FHA-approved appraiser.
In general, the answer is no. FHA loans are intended to fund primary residences for owner-occupiers. That said, you may be able to refinance a second home you already own but no longer occupy, if refinancing from your current mortgage into an FHA loan will benefit you financially. You can also buy a home that has been foreclosed upon as a second home or investment property with an FHA loan, if you do so through the HUD Home Store.
Yes, you’ll have to wait three years after a foreclosure, deed-in-lieu or short sale in order to take out a new FHA loan.
A mortgage cosigner can really help boost the amount of home you can get approved to buy, so it’s worth considering if you’re struggling to qualify for a loan. However, keep in mind that you’ll be tying yourself to this cosigner and their financial health — and vice versa. If you aren’t able to make your payments, it could severely strain your relationship and damage your cosigner’s credit.