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John Desmond

Can You Have More Than One FHA Loan?

Monday, July 30, 2012 - Article by: John Desmond - ENG Lending - Message

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
o length of time the previous property was owned by the borrower, and
o 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
o paid off the FHA-insured mortgage on the previous residence, or
o 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
o relocating, and
o 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
o of the increase in dependents and the property's failure to meet family needs, and
o 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.

3. Vacating a jointly owned property
A borrower may be eligible for another FHA-insured mortgage if he/she is vacating a residence that will remain occupied by a co borrower.
Example: An example of an acceptable situation is one in which there is a divorce and the vacating ex-spouse will purchase a new

4. Non-occupying co borrower:
A borrower may be qualified for an FHA-insured mortgage on his/her own principal residence even if he/she is a non-occupying co borrower with a joint interest in a property being purchased by other family members as a principal residence with an FHA insured mortgage.

For all your FHA questions call ENG Lending at 888-407-1592. We provide mortgage loans in all 50 states.

John Desmond
Branch Manager
ENG Lending

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