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You may have already secured a home with an FHA loan but still wonder if you can obtain another FHA loan to refinance your primary residence, purchase a new home due to an increase in family size, or purchase investment properties. The great news is that you can get more than one FHA loan. However, the number of FHA loans that accrue to you is dependent on some factors and requirements that will be explained in detail within this article. Let’s proceed with examining what an FHA loan entails and how many FHA loans can you have under the right circumstances.
The Federal Housing Administration (FHA) loan is a mortgage loan that is backed by the government and disbursed by a bank or other lenders approved by the government agency. FHA loans are distinct from other conventional loans in that, FHA loans require a minimum down payment and demand a lower or minimum credit score from home buyers. The major aim of the FHA loan is to assist low or moderate-income families who may or can’t put up paying rental income to attain home ownership. The FHA mortgage is mostly familiar to first-time home buyers. Now let’s examine the disparity between FHA loans and conventional loans.
The major difference between an FHA and a conventional loan is that, while an FHA loan is backed by the government, conventional loans are mortgages that are not insured or guaranteed by the government. Other differences include:
Whenever you are ready to apply for your first FHA loan, there are certain criteria and requirements that make you eligible for an FHA loan. Even if you have an existing FHA loan, it is necessary you go over the requirements before applying for a second FHA loan. Below are the essential FHA loan requirements:
The required down payment is dependent on your loan amount and credit score. If you possess a credit score of 580 and above, you may be allowed a down payment of 3.5%. However, for a score between 500 and 570, a down payment of 10% is required.
Mortgage insurance is one of the mortgage payments required when assessing FHA loans and this payment is of two types. At the time of closing, you will be charged a flat fee of 1.75% of the loan amount, which can be added to your loan should in case you’re with no cash in hand. In addition to this, a monthly charge will be placed on the payment mortgage to cover the mortgage insurance on the loan. The overall payment is a fraction of the loan and is also determined by the loan-to-value ratio (LTV).
Your debt-to-income ratio (DTI) is the aggregate monthly debt payments as a percentage of your gross monthly income. Before you can qualify for an FHA loan, your DTI should be below 43%. For instance, if the monthly mortgage payments on your home is $1,500 and your monthly gross income is $5,000. It will be required that you shouldn’t have a monthly debt of above $650.
FHA-approved lenders will request your Social Security Number, income, and assets verification to ascertain how much home you can comfortably afford. In addition, you should not have any foreclosure for at least three years running.
There are various reasons why an individual will want to have multiple FHA loans. However, the major reasons include:
A growing family finding it difficult to sell their current home in order to purchase a new home can get an FHA loan in order to obtain a new home.
Although an FHA mortgage loan isn’t given for financing an investment property, rental home, or second home, it is one of the reasons why people seek to request two FHA loans. FHA loans are traditionally given to finance a primary residence.
If a borrower discovers that he/she would be needing to relocate to another city or a different area, they may be able to obtain multiple FHA loans. Relocating to a new area will require individuals to purchase a new home probably with a new FHA mortgage.
The death of a spouse or divorce is a possible reason for individuals to request an additional FHA loan.
You have access to multiple FHA loans throughout your entire life. The beautiful thing is that you don’t necessarily need to be a first-time home buyer to qualify for this opportunity. However, this does not imply that you can get an FHA loan in quick succession.
As stated earlier, the FHA mortgage loan program is designed to enable borrowers to own a home of their desire. Although there are instances where an FHA loan is given for other reasons aside from financing a home, this is usually under specific cases.
Having pending FHA mortgage payments is a mitigating factor in accessing two FHA loans. Before you can be qualified for a second FHA loan, you must have cleared your previous loan. You can’t have two mortgages running simultaneously.
The following circumstances will enable you to access a second FHA loan:
Generally, to prevent a lender from using the loan program for purchasing an investment property and other unqualified purposes, you can only have one FHA loan at a time. Although there are exceptions to these rules but handled by mortgage lenders on a case-by-case basis. For further inquiries about the process of obtaining another FHA loan after having an FHA-financed home, contact us at Security American Mortgage.