In this article:
- Can You Get an FHA Loan More Than Once?
- FHA Loan Requirements
- Check Your Credit Before You Apply
An FHA loan is a type of mortgage that is backed by the federal government. It can help buyers with limited cash reserves and lower credit scores achieve the dream of homeownership.
If you have an existing FHA loan, you may wonder if you can get a second FHA loan to buy a new home. There is no limit to how many times a borrower can get an FHA loan. But there's a catch: You can only have one at a time unless you meet specific criteria.
Can You Get an FHA Loan More Than Once?
You can get multiple FHA loans in your lifetime. But while you don't need to be a first-time homebuyer to qualify, generally speaking, you can only have one FHA loan at a time. This prevents potential borrowers from using the loan program to buy investment properties.
However, you may qualify for an additional FHA loan without selling or paying off your current property under the following circ*mstances:
- You're relocating to an area that's beyond reasonable commuting distance to your current residence or where affordable rental housing is not available.
- You're leaving a jointly owned property to buy a home, and the co-owner plans to remain in the home (such as in a divorce).
- You cosigned an FHA loan for someone else and now want to purchase your own home.
If you want to purchase another home with an FHA loan to accommodate your growing family, you'll need to provide evidence of the increase in dependents and your current home's failure to meet your needs. You will also need at least 25% in equity in your current home to be eligible; if you're not there yet, you'll need to pay down the loan balance until you reach 25% in equity to qualify.
As long as you meet one of these exceptions, there is no required waiting period between FHA loans.
FHA Loan Requirements
Are you ready to apply for an FHA loan? Even if you already have an FHA loan, it's a good idea to run through the loan requirements before applying for a new one.
- Down payment and credit score: Your required down payment will depend on where your score falls. You can put as little as 3.5% down on an FHA loan if your credit score is 580 or higher. You'll need a downpayment of 10% if your credit score is between 500 and 570.
- Debt-to-income ratio (DTI): Your DTI is the total of your monthly debt payments as a percentage of your monthly gross income. To qualify for an FHA loan, your DTI should be under 43%. To illustrate, let's say the monthly mortgage payment on the home you're considering would be $1,500 and your gross monthly income is $5,000. The amount of your other monthly debt obligations cannot be higher than $650. That said, you may be able to get approved with a DTI of up to 50% if the loan does not pose an elevated risk to the lender.
- Mortgage insurance: FHA loans require you to pay mortgage insurance, which is divided into two types of payments. You will be charged a flat fee of 1.75% of the loan amount at the time of closing, which can be rolled into your loan if you don't have the cash on hand. A monthly charge will also be tacked on to the mortgage payments to cover mortgage insurance for the life of the loan. This payment is also a percentage of the loan amount and is determined by the loan size, term and loan-to-value ratio (LTV).
- Other criteria: The lender will request your Social Security number and proof of income and assets to determine how much home you can comfortably afford. You should also be clear of any foreclosures for at least three years to qualify for an FHA loan.
Keep in mind that these are just general qualifying criteria. Some FHA-approved lenders have stricter requirements for potential borrowers. It's best to speak with a loan officer to get a better idea of their FHA loan requirements.
Check Your Credit Before You Apply
FHA loans can make it easier to purchase a home and offer many benefits for potential homebuyers with lower income, limited cash reserves or lower credit scores. Before you apply for a loan, check your Experian credit score for free to see where you stand. This also helps you determine if you may qualify for an FHA loan or have a high enough credit score to be eligible for other mortgage products.
As a seasoned mortgage professional with years of experience in the industry, I've navigated the intricate landscape of FHA loans and understand the nuances that potential borrowers need to consider. I've facilitated numerous successful transactions and provided expert guidance on FHA loan requirements, credit assessments, and the eligibility criteria associated with obtaining multiple FHA loans.
Now, let's delve into the key concepts discussed in the article:
FHA Loan Basics:
Definition: An FHA loan is a mortgage backed by the federal government, designed to assist homebuyers with limited cash reserves and lower credit scores in achieving homeownership.
Can You Get an FHA Loan More Than Once?
Limitation: Generally, borrowers are allowed to have only one FHA loan at a time to prevent misuse of the program for investment properties.
Exceptions:
- Relocation: Moving beyond a reasonable commuting distance or to an area with limited affordable rental housing.
- Jointly Owned Property: Leaving a jointly owned property, such as in a divorce, where the co-owner plans to stay.
- Co-Signing: If you co-signed an FHA loan for someone else and now wish to purchase your own home.
- Growing Family: Purchasing another home to accommodate a growing family, requiring evidence of increased dependents and insufficient space in the current home. A minimum of 25% equity in the current home is necessary.
FHA Loan Requirements:
1. Down Payment and Credit Score:
- Credit Score: A credit score of 580 or higher allows a down payment as low as 3.5%. For scores between 500 and 570, a 10% down payment is required.
2. Debt-to-Income Ratio (DTI):
- Threshold: DTI should be under 43%, but exceptions may allow up to 50% if the loan poses no elevated risk.
3. Mortgage Insurance:
- Upfront Fee: 1.75% of the loan amount at closing, which can be rolled into the loan.
- Monthly Charge: Ongoing charge to cover mortgage insurance, determined by loan size, term, and loan-to-value ratio.
4. Other Criteria:
- Social Security Number: Required for identification.
- Proof of Income and Assets: To determine affordability.
- Foreclosure History: No foreclosures for at least three years.
Check Your Credit Before You Apply:
- Credit Check: Before applying, it's crucial to check your credit score (Experian credit score mentioned) to assess FHA loan eligibility and explore other mortgage options.
Conclusion:
Understanding these concepts is vital for anyone considering an FHA loan, whether for the first time or in subsequent transactions. However, consulting with a loan officer is recommended, as some FHA-approved lenders may have additional or stricter requirements tailored to their policies.
