Can You Get More Than One FHA Loan?

While FHA loans are typically for owner-occupied homes, specific circumstances allow a borrower to qualify for an additional FHA-insured mortgage. This article outlines the conditions and requirements that permit a borrower to hold more than one FHA loan concurrently.

FHA Loan Occupancy Requirements

FHA loans require the borrower to occupy the property as their primary residence, meaning the home must be where the owner lives for the majority of the year. Borrowers are expected to move into the property within 60 days of closing and occupy it for at least one year. The Federal Housing Administration (FHA) states that a property financed with an FHA loan must serve as the borrower’s principal residence. Violating this occupancy agreement can lead to serious consequences.

When a Second FHA Loan is Permitted

Despite the general rule limiting borrowers to one FHA loan, specific exceptions exist under which a second FHA loan may be permitted. These exceptions are designed for situations where unforeseen life changes necessitate a new primary residence. Each scenario is evaluated on a case-by-case basis by the lender.

One common exception is relocation for employment, particularly when the new job is a significant distance from the current home. If a borrower needs to establish a new principal residence more than 100 miles from their existing FHA-financed property, they may qualify for a second FHA loan. This allows the borrower to retain their original home, which may then be converted to a rental property, while securing new housing in the new location. The relocation does not need to be employer-mandated to qualify for this exception.

An increase in family size can also provide grounds for an exception. If a borrower’s family grows substantially, such as through the birth of children or adoption, and their current FHA-financed home becomes inadequate to meet the family’s needs, they may be eligible for a second FHA loan. The borrower must provide satisfactory evidence that the family size has increased since the acquisition of the first property. This allows them to purchase a larger home without being required to sell their original FHA-insured property.

Another exception applies to borrowers vacating a jointly owned property. In situations like divorce or legal separation, if one borrower vacates an FHA-financed home that will continue to be occupied by a co-borrower, the vacating party may qualify for a new FHA loan for their own primary residence. This exception specifically addresses situations where a borrower is leaving the property with no intent to return, while the co-borrower remains.

Finally, a non-occupying co-borrower can be a party to an FHA loan for a property they do not reside in, while also having their own FHA-financed primary residence. This arrangement is typically used to help an occupying borrower qualify for a loan by leveraging the non-occupying co-borrower’s income and creditworthiness. The non-occupying co-borrower must usually be a family member related by blood, marriage, or law to the occupying borrower, especially if seeking a low down payment.

Financial Eligibility for an Additional Loan

Even when a borrower meets one of the FHA’s exceptions for obtaining a second loan, they must still satisfy rigorous financial underwriting criteria. The presence of an existing mortgage, even if the property is being rented out or is in a different location, significantly impacts a borrower’s financial capacity. Lenders will assess the borrower’s ability to manage payments on both properties.

Debt-to-income (DTI) ratios are a primary concern for lenders. The monthly payment from the existing FHA loan, including principal, interest, taxes, and insurance, will be factored into the DTI calculation for the new loan. While FHA guidelines generally allow for a maximum DTI of up to 43%, lenders may permit higher ratios, sometimes up to 50% or even 56.9%, if compensating factors are present. Such compensating factors might include significant cash reserves, an excellent credit history, or other income sources not typically included in standard calculations. If the first property is rented, typically 75% of the documented rental income can be considered to offset the existing mortgage payment, helping to lower the DTI.

Credit score requirements also remain a factor for an additional FHA loan. While the FHA generally requires a minimum credit score of 580 for a 3.5% down payment, or 500 with a 10% down payment, individual lenders may impose higher credit score requirements due to the increased risk associated with multiple mortgages. A stronger credit profile can lead to more favorable terms and a smoother approval process.

The new FHA loan must also adhere to FHA loan limits specific to the county where the new property is located. These limits vary significantly by county and are updated annually, ranging from a floor of approximately $524,225 for single-family homes in most affordable areas to a ceiling of about $1,209,750 in high-cost areas for 2025. The loan amount cannot exceed these established limits for the property type and location. Lenders will thoroughly evaluate the borrower’s overall financial picture to ensure they have the capacity to repay both mortgage obligations.