October 7, 2013
A reader asks, “I have recently split up with my girlfriend of 16 years we have never been legally married. She is not willing to refi to get my name off the house. I have not lived in the house for over a year and need to get another FHA loan on a house I am having built. I qualify financially. Is it possible for me to get another FHA loan since I no longer live in the house and the co-borrower does?”
FHA loan rules discuss the guidelines for having more than one FHA loan in HUD 4155.1 Chapter Four Section B. That section says of this particular circumstance, “A borrower may be eligible for another FHA-insured mortgage if he/she is vacating a residence that will remain occupied by a coborrower. Example: A couple is divorcing and the vacating ex-spouse will purchase a new home.”
Furthermore, “To determine the eligibility of a borrower for one of the exceptions in the table below, the underwriter must consider the
• length of time the previous property was owned by the borrower, and
• circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage.”
That is found under the section titled, “Exceptions to the FHA Policy Limiting the Number of Mortgages Per Borrower”. However, borrowers should take note of an addendum to this printed later in the guide:
“Under no circumstances may investors use the exceptions described in the table above to circumvent FHA’s ban on loans to private investors and acquire rental properties through purportedly purchasing ‘principal residences.'”
What does this mean? We have to look earlier in the chapter for the FHA loan policy regarding multiple FHA mortgages, which says, “To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower. 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, even if the property to be insured will be the only one owned using FHA mortgage insurance.”
Additionally, the FHA loan rules state, “Any person individually or jointly owning a home covered by an FHA- insured mortgage in which ownership is maintained may not purchase another principal residence with FHA insurance, except in certain situations as described in HUD 4155.1 4.B.2.d.
Exception: Properties previously acquired as investment properties are not subject to these restrictions.”
Borrowers cannot use single-family FHA home loans to purchase properties intended as rentals or other non-owner-occupied purposes. The FHA does make exceptions for multiple FHA loans in legitimate circumstances such as the one mentioned above, but as FHA loan rules state, these are handled on a case-by-case basis.
Do you have questions about FHA home loan rules? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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