While this is an open-ended question, the quick answer is YES. A borrower can have an FHA home loan and apply for a second FHA home loan.
Most people do not qualify for two FHA loans at the same time. The U.S. Department of Housing and Urban Development (HUD) has set specific rules making it difficult for this to occur. However, there are a few exceptions to those rules where one can qualify for a second FHA home loan.
The main reason for having two FHA home loans at once is an exception to the rule is due to the FHA mandate that you must live in the home you have an FHA loan for. In most cases, you won’t be able to have two FHA home loans at one time.
When Are You Allowed to Have Two FHA Home Loans at the Same Time?
As a general rule, HUD will only allow you to have one FHA home loan at a time. Usually, you need to pay off the first loan before you can apply for the next one.
In some circumstances, you are allowed to have two FHA home loans at one time. HUD allows multiple FHA loans when the circumstances of the borrower have changed significantly since the first FHA loan was closed.
There are four main reasons HUD will make an exception to the rule and allow you to have two FHA home loans at one time.
1. An Increase in Family Size
If your family has grown since you moved into your home and the house doesn’t meet your needs anymore, it may be possible to qualify for a second FHA loan. You will need to have a Loan-to-Value ratio of 75% or less on the principal residence.
2. Non-Occupying Co-Borrow
Another reason you may be eligible for a second FHA home loan is if you were the co-borrower and you don’t live in the home. If you helped someone else become eligible for an FHA loan as a co-borrower and you’re not living in that home, you may qualify for a second FHA home loan.
3. Relocating to a New Area
Those relocating may qualify for a new FHA loan if the relocation is for employment reasons and more than 100 miles from your current home. You will need to meet both the distance requirements and the employment requirements to qualify for a second FHA loan through this exception.
4. Leaving a Property you Own Jointly
When leaving a current principal residence with no intention of returning to the home, you may be able to qualify for a second FHA loan. The person occupying the home will need to be occupied by the co-borrower for you to qualify.
What’s the Process for Applying for a Second FHA Home Loan?
The process is the same as it was for the first FHA home loan when you need to apply. You will need to show the same type of documentation including proof of income, a credit report, and an appraisal for the home you will be buying.
It’s important to note, if you do qualify for a second FHA home loan, you will only be able to count rental income from the first property if you have 25% or more equity built up in the first property.