For many buyers, FHA loans make homeownership more accessible thanks to lower down payment requirements and flexible credit guidelines. But what if you already own a home? Can I still get an FHA loan? The short answer is yes, it is possible, but there are some important conditions and limitations.
This Redfin article breaks down when you can qualify for a new FHA loan when you are able to qualify for another property, which exceptions apply, and what options you would like to consider. Whether you’re looking for a home for sale in Phoenix, Arizona or exploring a home in Miami, Florida, understanding the FHA rules can help you make the right funding decision.
What is an FHA loan?
FHA loans are government-supported mortgages insured by the Federal Housing Administration. FHA loans designed for low-to-medium income borrowers typically require:
More flexible credit score requirements for 3.5% (580 or more credit scores above 580) compared to traditional loan FHA mortgage premiums (MIP) that protect lenders in default cases
These benefits make FHA loans attractive to first-time home buyers, but they don’t have to be the first timer to qualify.
If I already own a home, can I get an FHA loan?
yes. Owning another home will not automatically disqualify you from getting an FHA loan. However, since FHA loans cover major residences, your new property must be the home where you live.
Usually, you cannot have multiple FHA loans at once, so the key question is whether you plan to live in a new property full-time.
Exceptions for FHA Loan Rules and Multiple Properties
FHA loans are designed to help buyers purchase major residences rather than second homes or holiday facilities. In most cases, you can only get one active FHA loan at a time. However, the FHA allows certain exceptions.
General rules:
FHA loans must be used for major housing. Borrowers are usually limited to one FHA loan at a time. Although it is permitted to convert current FHA assets to rentals, you must meet the occupancy requirements for new homes.
Exceptions that may allow multiple FHA loans:
Relocating Employment: It’s not practical if you’re moving for work and commuting from your current home. Increase in household size: If your current home does not meet the family’s needs. Non-occupying joint load: if you co-sign another FHA loan but do not live in that property. Evacuate jointly owned property: If you are separated from the joint owner, such as a divorce.
These rules allow FHA loans to focus on affordable major homes while also allowing flexibility in major lifestyle changes.
If you already own a home, when should you consider getting an FHA loan?
You may consider applying for another FHA loan if:
I’m moving to work and need a new major housing. Your current home does not meet the needs of your home. You no longer plan to live in your current home and want to use it as a rental.
In either case, the lender will check their financial ability to manage multiple mortgage payments.
Pros and cons of multiple FHA loans
Before deciding to apply for another FHA loan, weigh your potential benefits and shortcomings.
Strong Points
Easier Eligibility: FHA loans have lower credit scores and down payment requirements compared to traditional loans. Flexibility of life change: Exceptions allow you to buy again once you move, grow your home, or leave your co-owner. First home renting options: You may be able to maintain existing property as a rental while funding new major homes. Government-Supported Security: FHA Insurance will make lenders more willing to work with borrowers who may not qualify for traditional funding.
Cons
Occupancy Limit: FHA loans must be a major residence and limit your ability to use them for your second home or investment. More strict financial reviews: Lenders may carry two mortgages, so they will scrutinise their debt-to-income ratios. Mortgage Insurance (MIP): Both loans require advance payments and ongoing MIP, which can increase long-term costs. Limited exception: Most borrowers are not eligible as only certain circumstances allow multiple FHA loans.
FHA loan requirements for second borrowers
If you already own a home and want to qualify for another FHA loan, you will need to meet both the standard FHA requirements and the additional terms that prove you can handle multiple mortgages.
The main requirements are:
Credit score: 3.5% down payment minimum score of 580 or 10% down with 500-579. Some lenders may set higher requirements. Down payment: At least 3.5% of the purchase price (score of 580 or above). This must come from your own funds or approved gift sources. Debt and Income (DTI) Ratio: FHA generally limits DTI to 43%, but some lenders are higher with strong compensation factors. If you already own a home, both mortgage payments will be overthrown by DTI. Stable income and employment: You need to provide evidence of reliable income (wage stubs, tax returns, W-2, etc.) to show that both homes can be covered if necessary. Occupancy Requirements: Unless you qualify for any of the FHA exceptions, the new property must be your primary residence. Mortgage Insurance (MIP): You will be liable for both your new loan advance payment and your annual MIP.
Meeting these requirements can be more challenging the second time, as the lender will scrutinise your finances more closely. If you can demonstrate that you are financially stable, and if you can meet FHA guidelines, you can qualify for a second FHA loan.
>>Read: Can I get a mortgage from a new job?
6 tips if you are considering multiple FHA loans
If you are still thinking about getting another FHA loan while you own the home, keep these tips in mind to increase your chances of approval and avoid surprises.
Financial Review: Make sure you have enough income and savings to comfortably cover two mortgages if necessary. Lenders will want to see you financially stable. Document exceptions clearly: If you are eligible for an FHA exception (such as relocation or family growth), gather documents such as employment documents and proof of dependents to strengthen your case. Reduce the debt-to-income ratio: Repay your credit card or other loans and lower your DTI before applying. This will give you more breathing patios for lender calculations. Consult with multiple lenders: FHA guidelines are consistent, but lenders may apply overlays (more stricter rules). Comparing lenders can help you find the best path forward. Mortgage Insurance Planning: Don’t forget that all FHA loans include prepayments and annual mortgage insurance premiums (MIP). This cost is summarised into a budget. Consider your long-term goals. Think about whether a second FHA loan is the best option or whether moving to a traditional loan on one property will save you money over time.
Alternative Financing Options
If you are not qualifying for another FHA loan, there are other mortgage options.
Traditional loans: could work for a second home or investment property. VA Loans: For eligible veterans and service members, VA Loans can fund multiple properties under certain circumstances. USDA loans: Available on rural property if you meet income and location requirements. Portfolio or non-QM loans: Some lenders offer unique situations, such as purchasing investment property while holding an FHA loan.
FAQ: FHA loans and multiple homes
1. Will owning another home disqualify me from my FHA loan?
No, however, a new FHA loan must be a primary residence unless it qualifies for an exception.
2. Can I still get another FHA loan by borrowing my current FHA home?
Yes, if you meet the occupancy and income requirements, and a new FHA loan is for your primary residence.
3. Can I have two FHA loans at once?
Yes, but only in special circumstances, such as employment transfers or a significant increase in family size.
4. If I co-sign another FHA loan, will the FHA rules apply differently?
Yes, if you are an unoccupied co-borrower, you can still qualify for your own FHA loan.
