For a lot of patrons, FHA loans make homeownership extra accessible due to decrease down cost necessities and versatile credit score tips. However what should you already personal a house? Can you continue to get an FHA mortgage? The quick reply is sure, it’s doable, however with some vital circumstances and restrictions.
On this Redfin article, we’ll break down when you possibly can qualify for a brand new FHA mortgage whereas proudly owning one other property, what exceptions apply, and what options you would possibly wish to contemplate. Whether or not you’re trying to find houses on the market in Phoenix, AZ or exploring homes in Miami, FL, understanding FHA guidelines may help you make the appropriate financing determination.
What’s an FHA mortgage?
An FHA mortgage is a government-backed mortgage insured by the Federal Housing Administration. Designed for low- to moderate-income debtors, FHA loans sometimes require:
A down cost as little as 3.5% (with a credit score rating of 580 or increased)
Extra versatile credit score rating necessities in comparison with typical loans
FHA mortgage insurance coverage premiums (MIP), which defend lenders in case of default
These advantages make FHA loans enticing for first-time homebuyers, however you don’t need to be a first-timer to qualify.
Are you able to get an FHA mortgage should you already personal a house?
Sure. Proudly owning one other house doesn’t robotically disqualify you from getting an FHA mortgage. Nonetheless, FHA loans are meant for major residences, so the brand new property should be the house you’ll stay in.
Since you possibly can’t sometimes have a number of FHA loans without delay, the important thing query is whether or not you propose to stay within the new property full-time.
FHA mortgage guidelines and exceptions on a number of properties
FHA loans are designed to assist patrons buy a major residence, not second houses or trip properties. Normally, you possibly can solely have one lively FHA mortgage at a time. Nonetheless, the FHA does enable sure exceptions.
Basic guidelines:
FHA loans should be used for a major residence.
Debtors are sometimes restricted to 1 FHA mortgage at a time.
Changing your present FHA-financed property right into a rental is allowed, however you will need to meet occupancy necessities for the brand new house.
Exceptions the place a couple of FHA mortgage could also be allowed:
Job relocation: When you transfer for work and commuting out of your present house isn’t sensible.
Enhance in family measurement: In case your present house not meets your loved ones’s wants.
Non-occupying co-borrower: When you co-signed on one other FHA mortgage however don’t stay in that property.
Vacating a collectively owned property: When you’re separating from a co-owner, corresponding to by way of divorce.
These guidelines maintain FHA loans targeted on inexpensive major houses whereas permitting flexibility for main life modifications.
When do you have to contemplate getting an FHA mortgage should you already personal a house?
You would possibly contemplate making use of for an additional FHA mortgage if:
You’re relocating for work and want a brand new major residence.
Your present house doesn’t meet your family’s wants.
You not plan to stay in your present house and wish to use it as a rental.
In all circumstances, your lender will evaluate your monetary skill to handle a number of mortgage funds.
Execs and cons of a number of FHA loans
Earlier than deciding to use for an additional FHA mortgage, weigh the potential advantages and downsides:
Execs
Simpler qualification: FHA loans have decrease credit score rating and down cost necessities in comparison with typical loans.
Flexibility for all times modifications: Exceptions assist you to purchase once more should you relocate, your family grows, otherwise you separate from a co-owner.
Choice to hire out your first house: You might be able to maintain your current property as a rental whereas financing a brand new major residence.
Authorities-backed safety: FHA insurance coverage makes lenders extra keen to work with debtors who may not qualify for typical financing.
Cons
Occupancy restrictions: FHA loans should be for major residences, limiting your skill to make use of them for second houses or investments.
Stricter monetary evaluate: Lenders will scrutinize your debt-to-income ratio since chances are you’ll be carrying two mortgages.
Mortgage insurance coverage premiums (MIP): Each loans require upfront and ongoing MIP, which might enhance your long-term prices.
Restricted exceptions: Solely particular conditions enable for a number of FHA loans, so most debtors received’t qualify.
FHA mortgage necessities for a second-time borrower
When you already personal a house and wish to qualify for an additional FHA mortgage, you’ll want to satisfy each the usual FHA necessities and extra circumstances that show you possibly can deal with a number of mortgages.
Key necessities embrace:
Credit score rating: A minimal rating of 580 for a 3.5% down cost, or 500–579 with 10% down. Some lenders might set increased necessities.
Down cost: At the very least 3.5% of the acquisition worth (with a 580+ rating). This should come from your individual funds or an accredited present supply.
Debt-to-income (DTI) ratio: FHA usually caps your DTI at 43%, although some lenders enable increased with robust compensating components. While you already personal a house, each mortgage funds can be factored into your DTI.
Regular earnings and employment: You’ll want to indicate proof of dependable earnings (corresponding to pay stubs, tax returns, or W-2s) to reveal you possibly can cowl each houses if required.
Occupancy requirement: The brand new property should be your major residence, except you qualify for one of many FHA’s exceptions.
Mortgage insurance coverage premiums (MIP): You’ll nonetheless be answerable for each upfront and annual MIP on the brand new mortgage.
Assembly these necessities will be tougher the second time round since lenders will scrutinize your funds extra intently. When you can present you’re financially steady and meet FHA’s tips, qualifying for a second FHA mortgage is feasible.
>>Learn: Can You Get a Mortgage with a New Job?
6 suggestions should you’re contemplating a number of FHA loans
When you’re fascinated about taking out one other FHA mortgage whereas nonetheless proudly owning a house, maintain the following pointers in thoughts to enhance your probabilities of approval and keep away from surprises:
Evaluation your funds: Ensure you have sufficient earnings and financial savings to comfortably cowl two mortgages if mandatory. Lenders will wish to see that you just’re financially steady.
Doc your exception clearly: When you qualify for an FHA exception (like relocation or family progress), collect documentation, corresponding to an employment letter or proof of dependents, to strengthen your case.
Scale back your debt-to-income ratio: Pay down bank cards or different loans to decrease your DTI earlier than making use of. This offers you extra respiration room in lender calculations.
Speak to a number of lenders: FHA tips are constant, however lenders might apply overlays (stricter guidelines). Evaluating lenders may help you discover the most effective path ahead.
Plan for mortgage insurance coverage: Do not forget that each FHA mortgage contains upfront and annual mortgage insurance coverage premiums (MIP). Issue this price into your price range.
Take into account long-term objectives: Take into consideration whether or not a second FHA mortgage is the best choice, or if transitioning to a standard mortgage for one property might prevent cash over time.
Various financing choices
When you don’t qualify for an additional FHA mortgage, there are different mortgage choices to discover:
Typical loans: May fit for second houses or funding properties with increased down funds.
VA loans: For eligible veterans and repair members, VA loans can finance a number of properties below sure circumstances.
USDA loans: Accessible for rural properties should you meet earnings and placement necessities.
Portfolio or non-QM loans: Provided by some lenders for distinctive conditions, like shopping for an funding property whereas holding an FHA mortgage.
FAQ: FHA loans and a number of houses
1. Does proudly owning one other house disqualify me from an FHA mortgage?
No, however the brand new FHA mortgage should be for a major residence except you qualify for an exception.
2. Can I hire out my present FHA house and nonetheless get one other FHA mortgage?
Sure, should you meet occupancy and earnings necessities, and the brand new FHA mortgage is to your major residence.
3. Can I ever have two FHA loans without delay?
Sure, however solely in particular circumstances, corresponding to job relocation or vital household measurement enhance.
4. Do FHA guidelines apply in another way if I co-signed on one other FHA mortgage?
Sure, should you’re a non-occupying co-borrower, you possibly can nonetheless qualify to your personal FHA mortgage.
