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Can A Borrower Have More Than One FHA Mortgage At The Same Time

One of the first questions that existing FHA Borrowers who are interested in purchasing another house is “can they purchase the new house with a second FHA Loan, if they want to keep the first house as an investment and rent it out? The answer is yes under certain circumstances.

First of all FHA does not do investment loans, FHA is a owner occupied loan, meaning that the house must be the Borrower’s Primary Residence, which means that the Borrower must live in the house for the majority of the calendar year.  Further the Borrower must take occupancy of the house within 60 days from the Closing of the loan, and continue to occupy the house for at least one year.

Because FHA is intended to be an owner occupied loan, and to prevent circumvention of the intent of the loan, “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”.

Having said that, FHA will allow for exceptions that fall within certain circumstances, in order to determine if the Borrower is eligible for an exception the Underwriter must first take into consideration:

  • The length of time the Borrower owned the previous
  • The circumstances that the Borrower wants purchase another property

Once the Underwriter has taken the above into consideration, an exception may be granted for the following reasons.

  • The Borrower is relocating
  • The Borrower is establishing residency in an area outside reasonable commuting distance from his/her current principal residence

 Note: 

    • If the borrower later returns back to the location of the first house he/she Is not required to re-establish primary residency In that, also 
    • The relocation does not need to be employer mandated to qualify for this exception.
  • The Borrower may be eligible for another home with an FHA-Insured mortgage if the number of his/her legal dependents Increases to the point that the present house no longer meets the family's needs
  • The first FHA mortgage has a Loan-To-Value (LTV) of 75% or less, based on the outstanding mortgage balance and a current appraisal
  • The Borrower vacating the property, but the property will continue to be occupied by a Co-Borrower.  Example: A couple is divorcing
  • The Borrower is a Non-Occupying Co-Borrower on a property that he/she purchased with a family member and the property is the principal residence for the other family member

If a Borrower with an Existing FHA Mortgage cannot meet one of the exceptions listed above, then the Borrower MUST:

  •  Pay off the existing FHA Mortgage on the first residence, or
  • Terminated ownership of that residence.

So as you can see there are several ways that a Borrower can have multiple FHA Mortgages at the same time as long as the Borrower meets one of the above exceptions, and is not trying to circumvent the rules in order to purchase an investment property.

 

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308  gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage. 

Comment balloon 11 commentsGeorge Souto • September 25 2011 06:58PM
Can A Borrower Have More Than One FHA Mortgage At The Same Time
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