Thursday, August 2, 2012

Can You Have More Than One FHA Loan?

If you currently have an FHA loan, there are restrictions to obtaining a second FHA loan. Here are the actual FHA guidelines (with a bit of editing for ease of reading):

To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower. FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be insured will be the only one owned using FHA mortgage insurance.

Any person individually or jointly owning a home covered by an FHA insured mortgage in which ownership is maintained may not purchase another principal residence with FHA insurance, except in certain situations as described below:

The table below describes the "exception" situations in which FHA does not object to borrowers obtaining multiple FHA-insured mortgages.
Note: Considerations in determining the eligibility of a borrower for one of the exceptions in the table below include the

• length of time the previous property was owned by the borrower, and
• circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage.

Important: In all cases other than those listed below, the borrower is not eligible to acquire another FHA-insured mortgage until he/she has either
• paid off the FHA-insured mortgage on the previous residence, or
• terminated ownership of that residence.

Policy Exception Eligibility Requirements
1. Relocation
A borrower may be eligible to obtain another mortgage using FHA insurance, without being required to sell an existing property
covered by an FHA-insured mortgage, if the borrower is relocating, and establishing residency in an area not within reasonable commuting distance from the current principal residence.
If the borrower subsequently returns to the area where he/she owns a property with an FHA-insured mortgage, he/she is not required to re-establish primary residency in that property in order to be eligible for another FHA-insured mortgage.
Note: The relocation need not be employer mandated to qualify for this exception.
2. Increase in family size
A borrower may be eligible for another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet family needs, and the LTV ratio based on the outstanding mortgage balance and a current appraisal equals 75% or less. If it does not, the borrower
must pay the loan down to 75% LTV or less.

Note: A current residential appraisal must be used to determine LTV compliance. Tax assessments and market analysis by real
estate brokers are not acceptable proof of LTV compliance.

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