Owning a home is a significant milestone in life. If you’re exploring home loans, FHA loans might be on your radar. Let’s dive into the nitty-gritty of how many FHA loans you can have, alongside some essential basics.
Can You Get An FHA Loan Twice?
Many people wonder if it’s possible to have more than one FHA loan at a time. As a general rule, the FHA prefers individuals to have only one FHA loan at a time. However you can get a second FHA Loan if you get a new job, move at least 100 miles away, increase your family size, or co-signed for someone elses FHA Loan.
FHA Loan Basics
FHA loans are designed to help people become homeowners. They’re backed by the Federal Housing Administration, which makes them less risky for lenders. With this backing, lenders can offer loans to people who might not qualify for traditional loans. Here’s a brief overview:
- Easier Credit Score Requirements: Even if your credit isn’t perfect, an FHA loan might still be within reach.
- Lower Down Payments: You might only need to put down as little as 3.5% of the home’s purchase price.
- Closing Cost Assistance: FHA loans can also help with some of the costs involved in closing on a home.
These features make FHA loans popular, especially among first-time home buyers.
Exceptions To Multiple FHA Loan Restrictions
Life’s unpredictable nature sometimes means rules need bending, especially when it comes to owning a home. Although the FHA usually limits individuals to one FHA loan at a time, several life changes could make you eligible for another. Let’s take a closer look at some of these exceptions:
Relocating
Work Moves: If your job requires you to relocate and your new workplace is too far from your current home to commute reasonably, you might be allowed to get another FHA loan. This is particularly common for people whose jobs require them to move frequently, like military personnel.
Divorce
Starting Fresh: Divorce can be challenging, and sorting out who keeps the house can be part of that challenge. If you find yourself leaving an FHA-financed home as part of a divorce settlement, you may apply for another FHA loan. This ensures you still have the opportunity to own a home independently.
Increased Family Size
Space for Everyone: Families can grow unexpectedly. Maybe there’s a new baby, or a relative needs to move in with you. If your current home can’t comfortably accommodate your larger family, the FHA may consider this a valid reason for another loan. You’ll likely need to document why your current living situation is inadequate, such as insufficient bedrooms.
Co-Signing
Helping Hands: Sometimes, you cosign an FHA loan to help a loved one qualify for their home. If you don’t live in that home, the FHA doesn’t count it against you, so you can apply for another FHA loan for your residence. This is because you’re technically responsible for the loan but not benefiting from living in the property.
These exceptions are crafted to ensure that FHA loans fulfill their mission: helping individuals and families own homes. They recognize that life’s circumstances can change, necessitating a new place to live, even if you already have an FHA-financed home.
Communication with a loan officer is key to navigating these exceptions. Each scenario is unique, and professional guidance can help you understand your eligibility and next steps.
How To Qualify For More Than One FHA Loan
If you find yourself in a situation that might qualify for an exception to the one FHA loan rule, there are specific criteria you’ll need to meet. Securing a second FHA loan is not guaranteed, but understanding what’s required can improve your chances. Here’s what you need to know:
Debt-To-Income Ratio
One of the main things lenders look at is your debt-to-income ratio (DTI). This is all the money you owe each month (like car payments, your current mortgage, and credit card bills) compared to how much money you make. For a second FHA loan, you’ll need to show that you can handle paying for both properties. The specific DTI requirement can vary, but keeping this ratio low shows lenders you can manage another loan.
Down Payment
While FHA loans are known for their low down payment requirement (as little as 3.5%), having a significant down payment can increase your chances of approval for a second loan. It demonstrates to lenders that you have the financial discipline and savings to take on another mortgage.
Mortgage Insurance Premium
Don’t forget about the Mortgage Insurance Premium (MIP), which is a must for FHA loans. This is an extra fee on top of your monthly mortgage payment that protects the lender in case you can’t pay your loan. For a second FHA loan, you must be ready to handle the MIP for both loans.
Meeting these requirements doesn’t guarantee a second FHA loan, but it does bring you a step closer. It’s about demonstrating to lenders that taking on another loan won’t overstretch your finances.
Alternative Options To Multiple FHA Loans
Sometimes, even with the best intentions and preparations, securing a second FHA loan might not work out. But don’t lose heart; there are other paths to homeownership worth considering:
- Conventional Loans: If your credit score has improved since getting your first FHA loan, you might qualify for a conventional loan, which can offer more flexibility without the need for mortgage insurance once you have 20% equity in the home.
- VA Loans: For veterans and active military members, VA loans offer a fantastic route with no down payment and no mortgage insurance requirements, provided you meet their service requirements.
- USDA Loans: If you’re looking at rural or semi-rural properties, a USDA loan might be the ticket. These loans offer zero down payment for homes in eligible areas and have income limits to qualify.
Exploring these alternatives can open new doors if a second FHA loan isn’t feasible. Each option has its unique benefits and requirements, so it’s worthwhile to investigate which one matches your current situation and future goals.
The Bottom Line– How Many FHA Loans Can You Have
When it comes to FHA loans, the main rule is usually one loan per person. But, life can throw situations at you—like moving for a job, getting a divorce, needing more space for a growing family, or helping out by co-signing—that could allow for another FHA loan.
Remember, to get that second loan, you’ll need to show you’re in good financial shape. If a second FHA loan doesn’t work out, don’t worry! There are other home loan options like conventional, VA, and USDA loans to explore. Buying a home is a big deal, so make sure you take your time, do your homework, and talk to the pros to find the best path for you.
FHA Loan FAQs
Can you have 2 FHA loans at once?
Yes, but it’s rare. You can have 2 FHA loans at once if you meet specific exceptions like relocating for work, divorce, an increase in family size, or if you co-signed someone else’s FHA loan. You’ll need to prove that you qualify for an exception and can financially manage another FHA loan.
Is there a maximum FHA loan amount?
Yes, the FHA sets maximum loan limits that vary by location. These limits are based on the cost of living and the housing market in each area. You can check the current FHA loan limits for your area on the HUD (Department of Housing and Urban Development) website.
What is the FHA 75 rule?
The FHA 75 rule applies when you’re trying to get a second FHA loan due to an increase in family size. The rule states that if you have more than 75% equity in your current home, you may qualify for another FHA loan for a larger home to accommodate your growing family. This rule ensures that FHA loans help those genuinely in need of a bigger space.
Can I get another FHA loan if I sell my house?
Yes, if you sell your house, you can apply for another FHA loan for a new primary residence. Selling your home frees you from your previous FHA loan, making you eligible for another one as long as you meet the necessary qualifications and criteria for approval.
