How Many FHA Loans Can You Have?
Miranda Crace4-minute read
November 20, 2023
An 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 the vast majority of 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.
FHA Loan Basics
The Federal Housing Administration insures FHA mortgage loans. They’re popular home loan options for borrowers who want to make a low down payment. If your FICO® Score is 580 or higher, these government-backed loans require a down payment that’s 3.5% of a home’s final purchase price.
A 3.5% down payment for a home that costs $200,000 would be $7,000. That’s lower than the $20,000 you’d need to come up with if you made a 10% down payment, which is required for FHA borrowers with credit scores between 500 and 579.
However, the lower down payments and flexible credit requirements of FHA loans come with a condition. You can only use the loan to finance the purchase of a primary residence, not a second home or an investment property.
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Can You Get An FHA Loan Twice?
You can take out more than one FHA 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.
The Exception To Multiple FHA Loan Restrictions
Some exceptions may qualify you to take out a second FHA loan before selling your current home or paying off your existing 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 earn enough monthly income to satisfy your mortgage lender’s income requirements.
You can take out an additional FHA loan if a new job isn’t a reasonable commute from your current primary residence.
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.
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.
If you’re co-signing a mortgage with another family member to help them get approved for a mortgage, you may qualify for two FHA loans.
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.
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How To Qualify For More Than One FHA Loan
You’ll need to meet lender financial requirements to take out two FHA loans.
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.
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 to 579, you must make at least a 10% down payment. Rocket Mortgage® requires a minimum 580 credit score for an FHA loan.
Most mortgage lenders also require that you have enough savings in your bank accounts. 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 and 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 fold it into your loan amount. You also pay an additional, ongoing premium that gets added as a monthly charge to your mortgage payments.
Alternative Options To Multiple FHA Loans
You have options if you can’t take out two FHA loans at once.
- Apply for another type of mortgage, such as a conventional loan. Your new lender may not approve your loan application if having two mortgage payments sends your debt-to-income ratio over the 43% mark.
- Wait to apply for another FHA mortgage until you pay off your first FHA loan. Paying off your first FHA loan while keeping your home should make it easier to qualify for a new FHA loan. You won’t need to worry about making two mortgage payments each month.
- Sell your current home. You can use the proceeds from selling your home to pay off your original FHA loan before you apply for an additional FHA mortgage.
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.
If you want another mortgage to purchase a second home or an investment property, apply to refinance your FHA loan and take cash out that can go toward a down payment on a different loan type, such as a conventional loan.
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