How Many FHA Loans Can You Have?
Dan Rafter4-minute read
September 15, 2022
An FHA loan is a good choice for borrowers with less-than-perfect credit or for those struggling to come up with a large down payment. This loan isn’t a good choice, though, if you want to finance the purchase of multiple investment properties.
Why? Because in the vast majority of cases, you can only take out one FHA loan at a time. Let’s go over how many FHA loans you can have in more detail.
FHA Loan Basics
FHA loans, mortgages insured by the Federal Housing Administration, are popular mortgage options for borrowers who are looking for a low down payment. That’s because these government-backed loans require a down payment of just 3.5% of your home’s final purchase price if your FICO score is 580 or higher.
For a home costing $200,000, then, that comes out to a down payment of $7,000, lower than the $20,000 you’d have to come up with if you needed a down payment of 10%.
There is a limit, though, on FHA loans. You must use this loan type to finance the purchase of your primary residence, not a second home or investment property.
Can You Get An FHA Loan Twice?
You can take out more than one FHA loan during your life. You just can’t take out more than one at a time…in most instances. The reason for this? You’re supposed to use FHA loans to buy a primary residence. The Federal Housing Administration doesn’t want borrowers taking out multiple FHA loans – and benefitting from less stringent requirements — to purchase investment properties instead of fulltime homes.
The Exception To Multiple FHA Loan Restrictions
There are a few exceptions that allow you to take out a second FHA loan before you sell your current home or pay off your existing FHA loan. Remember, though, that taking out two FHA loans means you’ll have to make two mortgage payments every month. Make sure your budget can handle this. You’ll need to make sure, too, that your monthly income is high enough to satisfy your mortgage lender.
You can take out an additional FHA loan if you are moving to a new community that is not a reasonable commute’s distance from your current primary residence.
You might also qualify for a second FHA loan if you are getting a divorce and are moving out of a house you shared with a co-borrower. This could happen if the person you are divorcing decides to stay in the first home and you are ready to buy a second.
Increased Family Size
You can qualify for an additional FHA mortgage if your family has grown, and your current home does not meet its needs. This can be challenging. You'll need to provide evidence that your family has increased in size and that your current home is now too small. You'll also need to have generated at least 25% equity in your current home to qualify for that second FHA loan. If you haven't built up enough equity, you'll need to pay down your FHA loan's balance until you reach that 25% mark.
If you are co-signing a mortgage with another family member, as a way to help that relative qualify for a mortgage, you might qualify for two FHA loans. This will happen if you are already paying off an FHA loan and the new loan you are cosigning is also an FHA mortgage. Remember, when you co-sign on a loan, that loan also becomes your responsibility. If your co-signer stops making payments, you’ll be responsible for making them.
Qualifying For More Than One FHA Loan
To take out two FHA loans, you’ll need to meet certain financial requirements.
First, you must prove that you can afford both mortgage payments. Mortgage lenders typically want your total monthly debts, including your mortgage loans, to consume no more than 43% of your gross monthly income. If the combination of two mortgage payments pushes your debt-to-income ratio over this level, you might struggle to qualify for that second FHA loan.
You’ll also need enough down payment money. If your FICO credit score is 580 or higher, you’ll need a down payment of 3.5% of your home’s final purchase price. If your FICO score is 500 to 579, you’ll need a down payment of 10% of your home’s final purchase price. Rocket Mortgage® requires a minimum 580 credit score for an FHA loan.
Most mortgage lenders also want to see enough savings in your bank accounts. Most will require that you have enough money saved to cover two mortgage payments. This is in addition to the money you need for your down payment and closing costs.
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Alternative Options To Multiple FHA Loans
Not able to take out two FHA loans at once? You do have options.
- You can apply for another type of mortgage, such as a conventional loan. You will have to meet income requirements though. Your new lender probably won’t approve you if the combination of two mortgage payments boosts your debt-to-income level much past the 43% mark.
- You can wait to apply for another FHA mortgage until after you pay off your first FHA loan. This will make it easier to qualify: You won’t have to worry about having enough income to handle two mortgage payments each month.
The Bottom Line
It’s not impossible to qualify for two mortgages at once. But in most circumstances, you can’t have two FHA loans at the same time. If you want another mortgage, maybe to finance the purchase of a second home or investment property, you might consider refinancing your existing FHA loan to take cash out that can go toward a down payment on a different loan type, such as a conventional loan.
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