For a lot of consumers, FHA loans make homeownership extra accessible due to decrease down fee necessities and versatile credit score pointers. However what for those who already personal a house? Can you continue to get an FHA mortgage? The brief reply is sure, it’s potential, however with some necessary situations 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 properties on the market in Phoenix, AZ or exploring homes in Miami, FL, understanding FHA guidelines can assist you make the precise financing resolution.
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 usually require:
A down fee 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 engaging for first-time homebuyers, however you don’t need to be a first-timer to qualify.
Are you able to get an FHA mortgage for those who already personal a house?
Sure. Proudly owning one other dwelling doesn’t robotically disqualify you from getting an FHA mortgage. Nonetheless, FHA loans are supposed for major residences, so the brand new property should be the house you’ll stay in.
Since you possibly can’t usually have a number of FHA loans without delay, the important thing query is whether or not you intend to stay within the new property full-time.
FHA mortgage guidelines and exceptions on a number of properties
FHA loans are designed to assist consumers buy a major residence, not second properties or trip properties. Typically, you possibly can solely have one energetic FHA mortgage at a time. Nonetheless, the FHA does enable sure exceptions.
Normal guidelines:
FHA loans should be used for a major residence.
Debtors are usually restricted to 1 FHA mortgage at a time.
Changing your present FHA-financed property right into a rental is allowed, however you have to meet occupancy necessities for the brand new dwelling.
Exceptions the place a couple of FHA mortgage could also be allowed:
Job relocation: In the event you transfer for work and commuting out of your present dwelling isn’t sensible.
Enhance in family measurement: In case your present dwelling not meets your loved ones’s wants.
Non-occupying co-borrower: In the event you co-signed on one other FHA mortgage however don’t stay in that property.
Vacating a collectively owned property: In the event you’re separating from a co-owner, reminiscent of by means of divorce.
These guidelines maintain FHA loans centered on inexpensive major properties whereas permitting flexibility for main life modifications.
When do you have to contemplate getting an FHA mortgage for those who 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 dwelling doesn’t meet your family’s wants.
You not plan to stay in your present dwelling and wish to use it as a rental.
In all instances, your lender will overview 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 disadvantages:
Execs
Simpler qualification: FHA loans have decrease credit score rating and down fee necessities in comparison with typical loans.
Flexibility for all times modifications: Exceptions permit you to purchase once more for those who relocate, your family grows, otherwise you separate from a co-owner.
Choice to lease out your first dwelling: You could possibly 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 won’t qualify for typical financing.
Cons
Occupancy restrictions: FHA loans should be for major residences, limiting your skill to make use of them for second properties or investments.
Stricter monetary overview: Lenders will scrutinize your debt-to-income ratio since it’s possible you’ll be carrying two mortgages.
Mortgage insurance coverage premiums (MIP): Each loans require upfront and ongoing MIP, which may improve your long-term prices.
Restricted exceptions: Solely particular conditions enable for a number of FHA loans, so most debtors gained’t qualify.
FHA mortgage necessities for a second-time borrower
In the event you already personal a house and wish to qualify for an additional FHA mortgage, you’ll want to fulfill each the usual FHA necessities and extra situations 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 fee, or 500–579 with 10% down. Some lenders might set increased necessities.
Down fee: Not less than 3.5% of the acquisition value (with a 580+ rating). This should come from your individual funds or an authorised reward supply.
Debt-to-income (DTI) ratio: FHA typically caps your DTI at 43%, although some lenders enable increased with robust compensating components. Whenever you already personal a house, each mortgage funds will probably be factored into your DTI.
Regular revenue and employment: You’ll want to point out proof of dependable revenue (reminiscent of pay stubs, tax returns, or W-2s) to exhibit you possibly can cowl each properties 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 accountable for each upfront and annual MIP on the brand new mortgage.
Assembly these necessities may be tougher the second time round since lenders will scrutinize your funds extra intently. In the event you can present you’re financially steady and meet FHA’s pointers, qualifying for a second FHA mortgage is feasible.
>>Learn: Can You Get a Mortgage with a New Job?
6 ideas for those who’re contemplating a number of FHA loans
In the event you’re excited about taking out one other FHA mortgage whereas nonetheless proudly owning a house, maintain the following pointers in thoughts to enhance your possibilities of approval and keep away from surprises:
Overview your funds: Be sure to have sufficient revenue and financial savings to comfortably cowl two mortgages if obligatory. Lenders will wish to see that you simply’re financially steady.
Doc your exception clearly: In the event you qualify for an FHA exception (like relocation or family development), collect documentation, reminiscent of an employment letter or proof of dependents, to strengthen your case.
Cut back your debt-to-income ratio: Pay down bank cards or different loans to decrease your DTI earlier than making use of. This provides you extra respiration room in lender calculations.
Discuss to a number of lenders: FHA pointers are constant, however lenders might apply overlays (stricter guidelines). Evaluating lenders can assist you discover the very best path ahead.
Plan for mortgage insurance coverage: Keep in mind that each FHA mortgage consists of upfront and annual mortgage insurance coverage premiums (MIP). Issue this price into your price range.
Contemplate long-term targets: Take into consideration whether or not a second FHA mortgage is the most suitable choice, or if transitioning to a traditional mortgage for one property might prevent cash over time.
Various financing choices
In the event you don’t qualify for an additional FHA mortgage, there are different mortgage choices to discover:
Standard loans: May go for second properties or funding properties with increased down funds.
VA loans: For eligible veterans and repair members, VA loans can finance a number of properties beneath sure circumstances.
USDA loans: Accessible for rural properties for those who meet revenue and site necessities.
Portfolio or non-QM loans: Supplied by some lenders for distinctive conditions, like shopping for an funding property whereas holding an FHA mortgage.
FAQ: FHA loans and a number of properties
1. Does proudly owning one other dwelling 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 lease out my present FHA dwelling and nonetheless get one other FHA mortgage?
Sure, for those who meet occupancy and revenue 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, reminiscent of job relocation or vital household measurement improve.
4. Do FHA guidelines apply otherwise if I co-signed on one other FHA mortgage?
Sure, for those who’re a non-occupying co-borrower, you possibly can nonetheless qualify to your personal FHA mortgage.
