How Many FHA Loans Can You Have in a Lifetime?

FHA loans are government-insured mortgages designed to make homeownership more accessible. They are popular for flexible credit requirements and lower down payment options compared to many conventional loans. While many believe one can only have a single FHA loan, this is a misconception. The Federal Housing Administration (FHA) program permits borrowers to obtain more than one FHA loan under specific circumstances. This flexibility supports homeowners as their life circumstances evolve.

The Single Property Occupancy Principle

The fundamental principle governing FHA loans is that the financed property must serve as the borrower’s primary residence. This requirement ensures the FHA program facilitates homeownership for individuals and families, not investment properties.

A property is considered a primary residence if the borrower intends to occupy it for the majority of the year. Borrowers are required to move into the property within 60 days of the loan closing date. The FHA mandates that the borrower occupy the home as their principal residence for at least one year following the purchase.

This primary residence requirement is why, in most cases, a borrower can only have one FHA loan at a time. The program’s structure discourages using its benefits for rental properties. Any deviation from the single occupancy rule must align with specific FHA-approved exceptions.

Specific Exceptions for Multiple FHA Loans

While the FHA generally limits borrowers to one FHA loan at a time, several specific exceptions permit an individual to obtain a second FHA-insured mortgage. These exceptions address common life changes that necessitate a new primary residence while an existing FHA-financed property is still owned.

Relocation for Employment

If a borrower needs to move for work, and their new job location is a significant distance from their current FHA-financed home, they may qualify for a second FHA loan. This generally requires the new residence to be 100 miles or more from the existing property. The relocation must be employment-related.

Increase in Family Size

An increase in family size can also qualify a borrower for an additional FHA loan. If the current FHA-financed home is no longer adequate due to a significant growth in the family, such as through births or adoptions, a second FHA loan may be permitted for a larger home. The borrower must provide satisfactory evidence of this increase in legal dependents.

Vacating a Jointly Owned Property

Borrowers vacating a jointly owned FHA-financed property, such as in cases of divorce or legal separation, may also be eligible for a new FHA loan. This exception applies when the co-borrower who remains in the original home will continue to occupy it as their primary residence. The vacating borrower can then seek a new FHA loan for their own principal residence.

Non-Occupying Co-Borrower

If an individual co-signed on an FHA loan for someone else but never resided in that property, they may still be eligible to obtain their own FHA loan for a primary residence.

Meeting Eligibility for a Subsequent FHA Loan

Even when one of the FHA’s specific exceptions applies, a borrower seeking a subsequent FHA loan must satisfy all standard eligibility criteria for the new mortgage. Lenders will assess the borrower’s overall financial health to determine their capacity for managing additional mortgage obligations.

Payment History

A strong payment history on the existing FHA loan is a primary requirement. The borrower must be current on their mortgage payments.

Credit Score

Lenders will review credit reports to assess the borrower’s overall creditworthiness. A minimum FICO score of 580 is generally required for a 3.5% down payment, although scores between 500 and 579 may be accepted with a 10% down payment. Many lenders, however, often prefer a credit score of 620 or higher.

Debt-to-Income (DTI) Ratio

Debt-to-income (DTI) ratio is a factor. The FHA generally limits a borrower’s total DTI to 43%, meaning total monthly debt payments, including the new mortgage, should not exceed 43% of gross monthly income. In some cases, with strong compensating factors such as a larger down payment or substantial cash reserves, a DTI up to 50% or even higher might be considered. If the existing FHA loan is not being sold, its payment will be included in the DTI calculation for the new loan.

FHA Loan Limits

The new FHA loan must adhere to the FHA loan limits specific to the county where the property is located. These limits vary by geographic area and are updated periodically.

Property Standards

The property itself must meet the FHA’s Minimum Property Standards (MPS), which ensure it is safe, sound, and secure for occupancy. A thorough FHA-approved appraisal is mandatory to confirm both the property’s value and its compliance with these standards.

Primary Residence Requirement

The property being purchased with the new FHA loan must also be intended as the borrower’s primary residence. Borrowers will also incur mortgage insurance premiums (MIP), both an upfront premium and monthly premiums, on the new FHA loan, as these are standard for all FHA-insured mortgages.