How many FHA loans can you have?

A Federal Housing Administration (FHA) loan is a good choice for borrowers with less-than-perfect credit and borrowers struggling to save a large down payment. However, it’s a poor choice if you want to use the loan to finance the purchase of multiple investment properties.

Why? Because in most cases, you can only take out one FHA loan at a time. Let’s explore in detail just how many FHA loans you can have.

Can you get an FHA loan twice?

You can take out more than one FHA mortgage loan during your lifetime. But in most cases, it’s no more than one at a time.

That’s because the FHA wants borrowers to use the FHA loan to buy a primary residence. The Federal Housing Administration doesn’t want borrowers to take advantage of the loan’s relaxed requirements and take out multiple FHA loans to purchase investment properties.

Are there exemptions for multiple FHA loans?

There are some exceptions that may allow you to take out a second FHA loan before selling your current home or paying off your existing FHA loan.

Relocating

You can take out an additional FHA loan if a new job isn’t a reasonable commute from your current primary residence. To qualify you usually need to be moving out of state or at least 100 miles away within your current state.

Divorce

You may qualify for a second FHA loan if you’re getting a divorce and moving out of the home you currently share with the co-borrower and plan on buying a second home only in your name.

Increased family size

You can qualify for an additional FHA mortgage if your family has grown and your current home no longer meets the family’s needs. To qualify, you must submit evidence your family has increased in size, and your existing home is too small.

Co-signing

If you’re co-signing a mortgage with another family member to help them get approved for a mortgage (and you currently have an FHA loan for your own home), you may qualify for an additional FHA loan.

Remember, when you co-sign a loan, that loan becomes your responsibility, too. If the primary borrower stops making payments, you’ll be responsible for paying off the debt.

How to qualify for more than one FHA loan

Keep in mind that taking out two FHA loans means two mortgage payments every month. Make sure you can afford a second monthly mortgage payment. To qualify for a second mortgage, you must also earn enough monthly income to satisfy your mortgage lender’s income requirements. These requirements may include the following.

Debt-to-income ratio

First, you must prove you can afford two mortgage payments. Mortgage lenders typically require that your total monthly debts, including your mortgage loans, don’t exceed 43% of your gross monthly income.

If the two mortgage payments send your debt-to-income ratio (DTI) over the 43% threshold, you may struggle to qualify for a second FHA loan.

Down payment

You’ll also need enough for the down payment. You can make a down payment that’s 3.5% of a home’s final purchase price with at least a 580 credit score. If your FICO^® Score ranges from 500 – 579, you must make at least a 10% down payment. Rocket Mortgage^® requires a minimum 580 credit score for an FHA loan.

Savings

Most mortgage lenders also require that you have enough savings. Most lenders require you to have enough money to cover two mortgage payments in case of emergency or loss of income. So, you must save for cash reserves and the money you’ll need for your down payment, as well as closing costs.

Mortgage insurance premium

FHA loans require mortgage insurance premiums (MIPs). The premium gets divided into two separate payments. At closing, you pay a one-time flat fee that’s 1.75% of the total loan amount. If you can’t pay the fee at closing, you can add it to your loan amount. You also pay an additional, ongoing premium that gets added as a monthly charge to your mortgage payments.

Available equity

You'll also need at least 25% equity in your home to qualify for a second FHA loan. If you haven't built up enough equity, you'll need to pay down your FHA loan balance until you reach the 25% equity threshold.

Alternative options to multiple FHA loans

If you need two mortgages and can’t wait to apply for another FHA mortgage until after you pay off your first FHA loan there are options available.

Use a conventional mortgage

If you have a credit score of 620 or higher, you can take out another mortgage using a conventional loan. You can even qualify for a down payment as low as 3%. However, your new lender may not approve your loan application if having two mortgage payments sends your debt-to-income ratio over the 43% mark.

The bottom line

While you can qualify for two FHA mortgages at once, that’s the exception to the FHA loan rule. In most cases, you can’t have two FHA loans at the same time.

The most important thing is that you don’t have to worry about it – we will help you understand all of your options and find you the best solution. If you want another mortgage to purchase a second home or an investment property, start a new loan application today.