Multiple FHA Loans are Available in Colorado Springs CO
I recently chatted with a past client who wanted to know if she could qualify for multiple FHA loans. Her situation looks like this: She currently owns a house with an FHA loan and would like to purchase a 2nd home utilizing FHA financing once again. She wants to retain her existing home, convert it to a rental and then purchase a new home with FHA financing.
My answer: Yes and No. There are situations where you can qualify for two FHA loans.
Believe it or not, FHA doesn't object to home buyers having more than one FHA loan. However, they are very specific about how and when you qualify.
Whether or not you're able to qualify for multiple FHA loans depends on a few things. FHA requirements say you must meet 1 of 4 guidelines.
1. Relocations. If the borrower is moving and re-establishing residency in a different area not within reasonable driving distance from the current principal residence, they may obtain an additional FHA loan. They are not required to sell the existing property covered by a FHA-insured mortgage. The move does not need to be required by their employer in order to qualify for this exception. Additionally, if the borrower returns to an area in which he or she owns a property with an FHA insured mortgage, it's not necessary that they re-establish primary residency in that property in order to be eligible for another FHA loan.
2. Boost in Family Size. The borrower may be permitted to get an additional home with an FHA-insured mortgage if the amount of legal dependents increases to the point where the present house no longer meets the family's needs. The borrower must provide sufficient evidence of the increase in dependents and the property's failure to satisfy the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the existing property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to establish LTV compliance. Tax assessments, market analysis by real estate brokers, etc., are not acceptable as proof of LTV compliance.
3. Moving out of a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is allowed to obtain an additional FHA-insured mortgage. Acceptable circumstances include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will move out of the existing property.
4. Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by members of the family may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage.
Important Note: By no means may investors use the exceptions outlined to circumvent FHA's ban on loans to private investors and acquire rental properties through allegedly purchasing "principal residences". Lenders will consider when determining eligibility: Length of time the previous property was owned by the borrower and the circumstances surrounding the new purchase.
In all other cases, the purchasing borrower either must pay off the FHA-insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA-insured mortgage.
Call or email me if you have a client who owns a home with an FHA loan - and wants to buy another one or if you're a homeowner interested in determining whether you qualify for multiple FHA loans.
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