The FHA has flexible guidelines except when it comes to how many loans you can have. In general, you can only carry one FHA loan at a time. It makes sense since the FHA loan is only for owner-occupied properties. After all, you can’t live in more than one property at a time.
Just like most rules, though, there are exceptions. You may find that you can have more than one FHA loan at a time. Keep reading to learn if it’s possible for you.
Did you Relocate?
If your job moved you and it’s too far too commute, you may be able to buy a home in the new area with an FHA loan. Just how far is ‘far’? It depends, but in general, the FHA states that the new job must be more than 100 miles from your current home.
Did Your Family Size Change?
If you bought your original home when you had two kids and now you have five kids, your home may not be a good fit. The FHA recognizes this and allows an exception to the FHA rule. You must prove that the home no longer suits your family size. The easiest way to do this is by proving that there aren’t enough bedrooms for each member of your family.
Qualifying for More Than One FHA Loan
Here’s the tricky part. Even if you get the exception to have more than one FHA loan at a time, you have to prove that you can afford it.
Remember, each loan has principal, interest, real estate taxes, homeowners insurance, and mortgage insurance. The entire payment (for both mortgages) must fit within your debt ratio. The FHA’s guidelines require:
- Maximum housing ratio of 31%
- Maximum total debt ratio of 41% – 43%
The lender must take into consideration your two mortgages plus any consumer debt you have such as:
- Credit cards
- Student loans
- Car loans
- Personal loans
If you can’t comfortably afford both mortgages, you won’t be able to qualify for an FHA loan. Remember, that FHA loans carry mortgage insurance for the life of the loan. On each loan, you’ll pay 0.85% of the loan amount annually. Your lender will charge you 1/12th of the premium on a monthly basis, so that will cause your mortgage payment to increase. The amount decreases each year as you pay the principal down, but it lasts for the life of the loan.
In addition to the debt ratio, you need to worry about a few other qualifying factors:
- Do you have stable employment? Lenders like to see a 2-year history of stable employment. Even if you aren’t at the same job, you should have a history within the same industry that shows your likelihood of continued employment for the future.
- Do you have increasing income? Lenders look back at your last two years of income. Did your income remain stable or increase during that time? If it decreased, you’ll need to explain it.
- Will you live in the new home as your primary residence? If you do get the exception for the second FHA loan, you must prove that you’ll live in the new home full-time as your primary residence.
- Did you default on any federal loans? If you defaulted on any federal loans in the past, you won’t be able to get another FHA loan.
Should you Have More Than One FHA Loan?
It’s up to you if you can comfortably afford two FHA loans at once. Even if your debt ratio is low enough, that’s on paper. You need to know if you can afford the payments.
Not only will you have to afford the mortgage payment, but think of the other costs that go along with owning two homes. You’ll pay for:
On average, homeowners pay 1% of the home’s value in repairs per year. That’s on top of the standard costs to keep a home running. If you rent your original home out, the rent may offset the cost of having two mortgages, but make sure you can afford the payments on your own too. There is no guarantee that your renters will fulfill the lease and/or make the payments on time.
Consider all of the factors and risks of carrying two FHA loans. If you want to keep your original home, either as an investment or as a possibility to move back to in the future, you’ll need an exception from the FHA. If you meet the requirements and can afford the second loan, it could be a good way to invest in real estate while still getting favorable FHA terms.