April 5, 2013
A reader asks, “Is it true that married couple can only have one FHA loan?” The answer to this question depends on several different factors. What do the FHA loan rules say about having more than one FHA mortgage?
If the married couple are obligated together on an FHA loan, there is generally no way to apply for a new FHA loan because of the residency requirement for the home purchased with an FHA mortgage.
The rules in this area can be found in HUD 4155.1 Chapter Four, 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.”
However, the FHA does make certain exceptions. What are they? Chapter Four states:
“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, and establishing residency in an area outside reasonable commuting distance from his/her current principal residence.”
There is also an exception based on family size. Chapter Four adds:
“A 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 borrower must provide satisfactory evidence
- of the increase in dependents and the property’s failure to meet family needs, and
- that the Loan-To-Value (LTV) ratio equals 75% or less, based on the outstanding mortgage balance and a current appraisal. If not, the borrower must pay the loan down to 75% LTV or less.Note: A current residential appraisal must be used to determine LTV compliance.”
It’s very important to note that there’s a burden of proof on the borrower to demonstrate the need for the new loan. To learn more about what it takes to qualify for these exceptions, speak to a loan officer or contact the FHA directly.
Do you have questions about FHA loans or refinance loans? 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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