Can You Have Multiple FHA Loans at The Same Time

This guide at GCA Forums Mortgage Group will cover having multiple FHA loans at the same time. For homebuyers, owning a home can seem discouraging, particularly regarding financing. This is where an FHA loan comes in. It is a government-backed loan program designed to make homeownership more attainable by offering a low down payment requirement. John Strange of GCA Forums Mortgage Group explains having multiple FHA loans at the same time:

With an FHA loan, borrowers can finance up to 96.5 percent of the home’s value, making it a popular option for those who need more funds for a traditional down payment. It is important to note that the FHA loan is meant only for owner-occupant primary residence homeowners, not real estate investors.

The primary owner-occupant rule on FHA loans discourages investors from buying multiple homes through FHA lenders and taking advantage of the low down payment—as little as 3.5%—compared to the higher down payment required for investment property purchases. The FHA loan was intended to help ordinary people buy homes, and using it to build an investment portfolio could negatively impact that goal.

Reasons Why You Can Have Multiple FHA Loans at the Same Time

But there are a few situations where you can have two FHA loans simultaneously. Here are some reasons you may be eligible. You are relocating for new employment. If you’re relocating to a different state for a new job opportunity and haven’t been able to sell your current home, you may still be eligible for a second FHA loan if you plan to buy a new home more than 100 miles from your current FHA home. This option can benefit you in a hot housing market where properties sell quickly.

Multiple FHA Loans at the Same Time Due To Growing Family

There is a need for a bigger home for a growing family. If you need a bigger one, you’ll need to prove you have at least 25% equity to avail of a second loan for an increase in your family number. That means you have to pay the mortgage balance down to 75% of
the value of your home, or choose a different loan type, like a conventional loan.

Multiple FHA Loans at the Same Time Guidelines Due To Being a Co-Borrower

Cosigning an FHA loan: If you want to co-sign a new FHA loan without being a co-borrower, you can do so by signing the mortgage note but not taking the title. If you have a current FHA loan and are interested in becoming a co-borrower on a new FHA loan, you may be required to give at least a 25% down payment. Alex Carlucci of GCA Forums Mortgage Group explains having multiple FHA loans at the same time due to divorce:

You are getting a divorce, and your spouse will be in the current home: If you’re divorced, and your house is awarded to your spouse, you may still qualify for a second FHA loan to purchase another home.

Co-borrowed for someone else’s FHA loan but want to buy your home now. If you were a co-borrower for another person’s FHA loan but now want to buy a home independently, you may qualify for a second FHA loan. However, you’ll need to be eligible for your new loan with the other payment counted against you unless you can prove that the payments were made by the person you co-signed with.

Multiple FHA Loans at the Same Time on HUD-Owned Properties

Buying a HUD real estate-owned (REO) property: You can use an FHA loan to purchase real estate-owned (REO) properties foreclosed upon by the FHA. Dustin Dumestre of GCA Forums Mortgage Group explains about having multiple FHA loans simultaneously.

Lenders can also help you explore alternative loan programs if you don’t qualify for a second FHA loan or if another loan program fits your financial situation better. An FHA-approved lender can offer various loan programs, including conventional, VA, and non-QM loans, giving you more flexibility and options when financing your home.

Unlike other home types, which require a buyer to be an occupant, you can use an FHA loan to
Purchase an REO property even if you won’t live there.

HUD Guidelines on Multiple FHA Loans at the Same Time

Additional requirements and determining factors: It’s important to note that each situation is unique, and there may be additional requirements to be eligible for a second FHA loan. Here are some possible factors they might check. The following sections will review the basic HUD agency mortgage guidelines.

HUD Credit Score Guidelines For FHA Loans

Credit score: Technically, the minimum credit score required for an FHA loan is 500 FICO. The minimum credit score requirement for a 3.5% down payment home purchase FHA loan is 580 FICO. Borrowers under 580 credit scores and down to 500 FICO need a 10% down payment. Most lenders will ask for a minimum credit score of 620 FICO to qualify for the program. Suppose you want to do a second FHA loan. Your credit score will be a critical factor in determining your eligibility.

HUD Debt-To-Income Ratio Guidelines

Debt-to-income ratio: The FHA requires borrowers to have a debt-to-income ratio of 43% or less. This means your total monthly debt payments, including your mortgage, credit cards, and other loans, can be at most 43% of your gross monthly income. If you're
When considering a second FHA loan, you must show a strong debt-to-income ratio to qualify.

HUD Guidelines on Employment History

Employment history: The FHA typically requires borrowers to have a steady employment history, with at least two years of continuous employment with the same employer. If you want to do a second FHA loan, ensure you can demonstrate a stable job over the past two years.

Property Condition Guidelines on FHA Loans

Property restrictions: The FHA has specific restrictions on the types of properties that can be financed with an FHA loan. For example, the property must be your primary residence and meet certain safety and livability standards. If you’re considering a second
A FHA loan ensures the property you’re interested in financing meets these requirements.

HUD Guidelines on Cash Reserves

Cash reserves: Some lenders may require borrowers to have a certain amount of cash reserves to qualify for a second FHA loan. This means that you may need a certain amount of money in savings or other liquid assets to show that you’re financially stable
and can manage multiple mortgage payments.

Do I need to talk with an FHA lender?

Speaking with an FHA-approved lender is crucial if you are considering getting a second FHA loan. Lenders are familiar with the FHA loan requirements, including additional requirements for a second loan. By speaking with a lender, you can determine if you are eligible for a second FHA loan and what steps you need to take to apply for the program. Alex Carlucci of GCA Forums Mortgage Group explains the importance of simultaneously talking with a loan officer experienced in multiple FHA loans at the same time.

Applying for a second FHA loan without the guidance of an HUD-approved lender can be risky. With expert advice, you might be aware of the nuances of the program, which can put you at a disadvantage during the approval process. Speaking with a lender can help you avoid costly mistakes and increase your chances of securing an FHA loan.

At GCA Forums Mortgage Group, we have in-house experts who can assist you if you plan to buy a new home. We specialize in various loan programs, including FHA loans, and can help determine which program is right for you. If you still need to determine the eligibility requirements for a second FHA loan, our team is happy to help. Contact us today at 262-627-1965 to get started! Text us for a faster response. Or email us at gcho@gustancho.com. The team at GCA Forums Mortgage Group is available seven days a week, evenings, weekends, and holidays.

FAQ’s on Can I Have Multiple FHA Loans at the Same Time

FAQ on “Can I Have Multiple FHA Loans at The Same Time?”

Should you be asking, “Can I have multiple FHA loans at one time?” These are the frequently asked questions and their answers.

How many FHA loans can I have out at once?

The answer is usually no. Though you typically can’t have multiple FHA loans at one time, there are certainly exceptions. Most FHA loans are intended for primary residences only, which is why there are restrictions on having more than one loan out at a time.

Are there any exceptions that allow for a borrower to have multiple FHA loans at the same time?

Yes, the FHA does allow borrowers to hold multiple loans but only in very specific circumstances. These include:

• Work Relocation – Moving for employment? If your current residence is too far to commute from, you may qualify for an additional FHA loan.
• Increase in Family Size – Need to upgrade your home due to having a larger family? This is another way you can qualify for a second FHA loan.
• Co-borrower on an Existing FHA Loan – Did you co-borrow on someone’s FHA loan before? If so, chances are you might be able to qualify for your own FHA loan on your own.
• Divorce or Legal Separation – If you and your spouse divorced, one of you might be living in the FHA-financed property while the other is looking for accommodation, in this case, a second FHA loan may be considered.
• Non-Occupant Co-Borrower – You may be eligible for your own FHA loan if you co-signed an FHA loan but never occupied the house.

Do I have to pay off my existing FHA loan before getting another one?

Not in all cases. As part of the FHA’s exceptions, you may qualify for a second FHA loan even if the first one is still active. However, like any new loan, you will need to fulfill all the requirements set out by the FHA, such as DTI ratio and credit score.

What is the FHA’s rule about occupancy requirements?

FHA loans are strictly limited to primary residences. Investment properties or second homes cannot be financed with an FHA loan unless you meet one of the exceptions noted above.

Can I rent my current FHA home out and still qualify for another FHA loan?

Perhaps. You may be eligible to rent out your current FHA home and qualify for another FHA loan if you meet an exception (like moving for a job or having a bigger family). However, the lender will confirm that your existing home fulfills your housing needs. You may need at least 25% equity in the first home if you plan to count rental income toward your debt-to-income ratio.

Will a second FHA loan require a higher down payment?

Not always. If you qualify for a second FHA loan, the typical 3.5% down payment will still apply. However, if you have not paid off your current FHA loan, there may be more restrictive lender requirements.

What is the impact on my debt-to-income (DTI) ratio with two FHA loans?

Your DTI will be calculated based on your two mortgages payments (your current FHA loan and the new one). If your DTI is too high, you might not qualify for the second FHA loan unless you have sufficient income or rental income from your first home.

Is it possible to refinance an FHA loan so that you may qualify for a new FHA loan?

Potentially, yes. You may be able to refinance your existing FHA loan to a conventional loan, which will allow you to utilize FHA financing on a different property. This plan is frequently employed by homeowners who wish to turn their principal home into a rental unit.

Is it true that my credit score has an effect on my ability to obtain another FHA loan?

That is correct. Although FHA loans are forgiving on credit scores (usually 580+ for a 3.5 percent down payment), when it comes to two mortgages needing to be paid, lenders are more likely to be strict.

If I don’t qualify for a second FHA loan, what are my options?

In the case that you do not qualify for a second FHA loan, the following options may be worth looking into:

• Switching to a Conventional Loan – This strategy allows you to reset your FHA eligibility.
• Selling Your House – If your home does not meet your needs anymore, selling your house may be your best bet.
• Checking Out Other Loan Products – You may be able to qualify for a VA, USDA, or conventional loan.

Although a borrower generally is eligible for one FHA loan only, there are always exceptions. If you feel like you qualify for one of the FHA exceptions, speak to an FHA approved lender about your options.