How Many FHA loans Can You Have? The Answer May Surprise You

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Are you thinking about getting an FHA loan to buy a home? Did you already buy a home using an FHA loan and are wondering whether it’s possible for you to do it again?

As with most things in life, it depends. Yes, it’s possible. But only under certain conditions.

What is an FHA Loan?

Let’s get the basics out of the way just to make sure we’re all on the same page. FHA stands for Federal Housing Administration. The FHA is part of the U.S. Department of Housing and Urban Development (HUD). FHA loans are mortgages that are insured by the FHA.

This insurance protects lenders in case a borrower defaults on their loan. Because of this insurance, lenders can offer FHA loans with lower down payment and credit score requirements than conventional mortgages.

In other words, the actual loan is made by whatever bank or mortgage lender you apply to, but this loan is federally insured (backed up) by the government.

It gives individual lenders more comfort knowing that the government can help them out should you not pay the loan back and default for some reason. This is part of the reason the terms are so favorable.

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FHA Loans Have Lenient Terms

Some key benefits of FHA loans include:

  • Low 3.5% down payment requirement.
  • Lower credit score requirements – as low as 580 in some cases, but try to aim for at least 620. The higher the score, the lower your interest rate on the loan.
  • More flexible debt-to-income ratio limits.
  • Help for homebuyers with imperfect credit.

So How Many FHA Loans Are Allowed?

The general rule is that you can only have one FHA loan at a time. If you already have an FHA loan on a primary residence, you can’t take out another FHA loan to purchase a second home.

However, there are a few exceptions that allow borrowers to have two or even three FHA loans simultaneously under certain circumstances.

Exceptions Allowing Multiple FHA Loans

Exception 1 – Relocating for Job/Family Reasons

The first major exception is if you need to relocate for an employment or family reason and cannot reasonably rent out your current FHA home. In this situation, you may be able to take out a second FHA loan for a new residence.

The relocation needs to be a considerable distance away as well. There are exact mileage amounts that you can obtain but generally speaking, if you’re moving to a different part of the same city, that’s not going to cut it. You need to be moving from say, DC to New York City.

Ok, maybe not that far but in a location where the commute would be unreasonable from your existing home location.

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Exception 2 – Increased Family Size

The second exception is if your current FHA home is too small for your growing family size. If you are forced to move due to an increase in family members, you may be approved for a second FHA loan at the same time.

This one is on a case by case basis and you should really talked to a lender to see whether or not this exception will hold up. Details matter.

Exception 3 – Special Hardship Circumstances

The FHA also has a provision to allow borrowers to temporarily have two FHA mortgages if they can demonstrate special hardship circumstances. This could include things like a serious medical issue requiring relocation.

However, these exceptions have strict requirements and additional approvals needed from the FHA. Borrowers who currently have an FHA loan should work closely with their lender if seeking an exception to take on a concurrent FHA mortgage.

Don’t go out there committing mortgage fraud. It’s not worth it. Especially when you get other types of loans that my only require you to put down 5%.

In conclusion, the general rule is that borrowers can only have one active FHA loan at a time. However, there are a few limited exceptions that allow borrowers to have two or three simultaneous FHA mortgages if they meet the FHA’s specific criteria.

Always consult with a qualified FHA lender to understand your options. And when ready, consult with one of our amazing realtors should you need help buying or selling a home.