Buying a second house when you already own one isn’t something FHA loans typically allow, but there can be 2nd FHA loan exceptions.
At the Wendy Thompson Lending Team, we can help you get a second FHA loan as a second-time homebuyer. Here’s what you must know.
Hey there, second-time homebuyers in Tennessee and Mississippi! You might be thinking, “FHA loans are only for people buying their first home. ” Wrong! The Wendy Thompson Lending Team has helped a lot of people who already own a home get the house they want with FHA loans.” Let’s talk about how FHA loans could help you buy your next home! *A map of the United States with clickable states
As a homeowner, you may be wondering if you can get another FHA loan even though you already have one. The answer is – it depends on your situation. The Federal Housing Administration (FHA) has rules about getting more than one FHA loan. These rules are meant to keep people from taking out too many loans. There are, however, some situations in which homeowners can get a second FHA loan.
What is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration. Key features include:
- Low down payments, as low as 3.5%
- More flexible credit score requirements – minimum 580 FICO
- Lower monthly mortgage insurance premiums than conventional loans
FHA loans make homeownership more accessible, especially for first-time home buyers. But what if you already have an FHA loan and want to purchase another home?
FHA Loan Occupancy Rules
The main hurdle to getting a second FHA loan is the occupancy requirement. All FHA borrowers must intend to use the property as their primary residence and live in the home within 60 days of closing.
FHA guidelines prohibit using FHA financing to purchase
- Second homes
- Investment properties
- Vacation homes
These occupancy rules aim to prevent homeowners from getting overextended with multiple FHA mortgages.
Exceptions to FHA Occupancy Rules
Even though it doesn’t happen often, homeowners can get a second FHA-backed mortgage in the following situations:
Relocation for Employment
You might be able to get a second FHA loan before you sell your first home if you need to move at least 100 miles for a new job. Strict documentation of the circumstances is required.
Home No Longer Meets Family’s Needs
If your family has grown a lot and you need a bigger home, the FHA may make an exception on a case-by-case basis. You will have to show proof of the rise in dependents and evidence that you own at least 25% of the property you are currently living in.
Leaving Jointly Owned Property
If you jointly own a home with a former spouse or partner but are vacating the property, you may qualify for an FHA loan on a new place to live.
Previously Co-Signed an FHA Loan
If you co-signed on an FHA loan for someone else in the past but never lived in the home, you can still qualify for an owner-occupied FHA mortgage.
Tips for Qualifying for a Second FHA Mortgage
If you think you may qualify for one of the FHA exceptions, here are some tips:
- Improve your credit score – The minimum is 580, but a higher score improves your chances
- Pay down debts to lower your DTI ratio
- Build equity in your current home – lenders may require at least 25%
- Document your circumstances thoroughly to prove eligibility
- Show sufficient income to afford both mortgage payments
Work with an experienced lender familiar with FHA guidelines. They can guide you through the application process to get approved for a second FHA loan.
Weighing the Pros and Cons of a Second FHA Mortgage
Before pursuing a second FHA loan, weigh the pros and cons:
Pros
- Low down payment options
- More flexible credit requirements
- Lower monthly mortgage insurance
Cons
- Strict occupancy rules limit use
- Mortgage insurance for life of loan
- Lower loan limits than conventional loans
- Requires home inspection and appraisal
Look at all your home financing options before deciding if a second FHA loan is right for you. An experienced loan officer can explain the differences and help you make the best choice.
Alternatives to Multiple FHA Loans
What if you don’t qualify for two FHA loans at once? Here are some alternatives to look into:
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Conventional loan – If you have equity, you may qualify for a conventional mortgage on a second home.
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Portfolio loan – Some lenders offer portfolio loans with more flexible requirements.
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FHA streamline refinance – If rates dropped, refinancing your current FHA mortgage could free up monthly cash flow.
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Cash-out refinance – Tap your home equity to pay down debts and improve your DTI ratio.
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Sell first home – You’ll have funds for a larger down payment on your next purchase.
Explore all your options to find the most affordable home financing solution. The key is working with a lender who understands your situation and can explain the pros and cons of each loan type.
Partner With an Experienced Lender
As you can see, qualifying for a second FHA loan involves many moving parts. An experienced lender guides you through the process smoothly.
Look for a lender who:
- Has extensive knowledge of FHA program guidelines
- Can advise if you meet eligibility requirements
- Helps you gather documentation and complete the application accurately
- Makes sure you provide everything needed for FHA approval
Getting approved for a second FHA loan is challenging but possible if you meet occupancy rule exceptions. Discuss your unique situation with a lender today to start the ball rolling on purchasing your next home.
4 Reasons You May Qualify for an FHA Loan on a Second Property
Generally, FHA loans are only for borrowers who will use the home as their primary residence. But FHA guidelines allow for some exceptions.
For example, you might be thinking, “I have an FHA loan and want to buy another house.”
You could use a conventional loan, but here’s when you could qualify for an FHA loan as a second-time homebuyer:
1. You’re not living in the home you own
Sometimes you may own a home but not live in it. For example, suppose you went through a divorce and moved out of the house.
In that case, the FHA could make an exception and allow you to get a second FHA loan.
2. You outgrew your existing home
You might be able to get one of the FHA 2nd loan exceptions if your family has grown and your current home no longer meets their needs.
This is on a case-by-case basis, and you must prove your existing home no longer suits your needs.
3. You relocated because of your job
If you relocated because of your job and didn’t want to sell your existing home, you may qualify for an FHA loan as a second-time homebuyer.
Generally, the home must be at least 100 miles away from your current home — that’s the FHA 100 mile rule.
4. Other personal reasons
Other FHA hardship exemptions exist, but they’re generally handled on a case-by-case basis.
Send a letter to the FHA Homeownership Center if you think you can get a second FHA loan.
Tell them about your situation and see if you’d be eligible for a second FHA loan.
At Wendy Thompson Lending Team, we specialize in FHA loans — our professionals can help you get into the home you need.
Who Qualifies as an FHA Loan Second-Time Homebuyer
You are an FHA loan second-time homebuyer if you currently own a home with an FHA loan and want to buy another house using an FHA loan.
Just like first-time homebuyers, borrowers must meet second home mortgage requirements to qualify for an FHA loan. Typically, this includes credit scores and down payment amounts.
But there’s good news:
You aren’t penalized for being a second-time homebuyer when pursuing an FHA loan. You can get a second chance to buy your forever home.
NEW FHA Loan Requirements 2024 – First Time Home Buyer – FHA Loan 2024
FAQ
Can I qualify for FHA if I own a home?
Yes, you can! FHA Loans are designed primarily for primary residences, but if you already own a home, you may still qualify under certain exceptions.
What will disqualify you from an FHA loan?
… an FHA loan are having a lot of debt compared to your income, having bad credit, or not having enough money for the down payment, monthly mortgage payments, or closing costs.
Can you get a mortgage if you already own a home?
What makes a home not qualify for FHA?
Health and safety concerns: Properties with potential health and safety hazards, such as lead-based paint, asbestos, or mold, may not qualify for an FHA loan.