One borrower is that the exception, not the rule. The Department of Housing and Urban Development has set specific rules for this rare occurrence. Most individuals are not eligible for two FHA loans in the same time, unless they proceed to a new place or significantly increase the size of the loved ones.
General Rule
HUD’s general rule is that a borrower may have only one FHA loan at a time. If the borrower needs a brand new FHA loan, he then usually needs to repay the initial FHA loan before applying for the next FHA loan.
Exception
Regardless of the general rule, HUD does permit one individual to have multiple FHA loans in certain conditions. In brief, HUD enables multiple FHA loans once the borrower’s personal circumstances have changed considerably since the closure on the initial FHA loan.
Relocation
One reason why HUD may allow another FHA loan is if the borrower relocates into a new place which isn’t within reasonable commuting distance of the debtor’s existing home. As an instance, if you move to another state because of a new job, then HUD will allow you to acquire another FHA loan in the new state. HUD has not understood what a reasonable commuting distance is, but most mortgage lenders agree that more than one hour is foolish.
Family Size
Another reason HUD might allow another FHA loan is if the borrower’s family size has considerably increased since closure on the initial FHA loan. The borrower must have the ability to demonstrate that his current home isn’t big enough to accommodate the family. For instance, if a borrower takes out an FHA loan to purchase a two-bedroom condo, and then has triplets, the borrower will likely qualify for a second FHA loan.
Rental Restrictions
One major limitation on getting another FHA loan, even in the event that you qualify for one of those two exceptions, is that you can only count leasing income from the very first property as earnings on the new FHA loan program if you have 25 percent equity in the very first property. Therefore, for instance, if you owe $85,000 in your very first home and the home is worth $100,000, you then simply have 15 percent equity, meaning you won’t have the ability to add rental income from your home in your second FHA loan program. Without that leasing income, you may not qualify under FHA debt-to-income ratio requirements. HUD requires your mortgage payment to be 29 percent or less of your gross yearly earnings.