The answer is No, and Yes. The policy of FHA is that they only guarantee one loan at a time for a borrower. However, there are circumstances they DO recognize can occur where a homeowner/borrower with an existing FHA mortgage has a need for another.
Listed below are the only circumstances in which a Borrower with an existing FHA-insured Mortgage for a Principal Residence may obtain an additional FHA-insured Mortgage on a new Principal Residence:
RELOCATION – A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:
– Relocating or has relocated for an employment-related reason; AND
– Establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.
If the Borrower moves back to the original area at a later date, the Borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence provided the relocation meets the two requirements above.
INCREASE IN FAMILY SIZE – A Borrower may be eligible for another house with an FHA-insured Mortgage if the Borrower provides satisfactory evidence that:
– the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; AND
– the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.
The above may be somewhat of a challenge if the borrower does not have much equity in the home and are faced with the requirement to pay down the existing mortgage to 75% of the value. The alternative would be to obtain a Conventional loan on the new residence with the minimum down payment of 5%.
VACATING A JOINTLY-OWNED PROPERTY – A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower. An example would be if the borrower and co-borrower are divorcing.
NON-OCCUPYING CO-BORROWER – A non-occupying co-Borrower on an existing FHA-insured Mortgage may qualify for another FHA-insured Mortgage on a new Property to be their own Principal Residence. An example of this could be when a parent co-signs on an FHA loan for their child. The parents don’t live in the home, but they are considered a non-occupying co-borrower. Those parents would be eligible for their own FHA loan.
A Borrower with an existing FHA-insured Mortgage on their own Principal Residence may qualify as a non-occupying co-Borrower on other FHA-insured Mortgages. An example of this would be when a family member (i.e. Mom and Dad) have their own FHA loan and a child needs them to co-sign on their own FHA insured loan. This would be acceptable.