December 3, 2012
A reader asks, “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.”
“What are the exemptions?
FHA loan rules, as published in HUD 4155.1 Chapter Four, Section B, state:
“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.”
There are exceptions to this rule, as stated in the same reference. Those exceptions include, but are not limited to the following as found in the FHA loan rules:
“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. If the borrower subsequently returns to the area where he/she owns a property with an FHA-insured mortgage, he/she is not required to re-establish primary residency in that property in order to be eligible for another FHA-insured mortgage.”
Additional exceptions may apply in the following circumstance:
“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. Tax assessments and market analyses by real estate brokers are not acceptable proof of LTV compliance.”
There are other exceptions that include vacating a jointly-owned residence or FHA loans with a non-occupying co-borrower. For all details, contact the FHA directly about rules that may apply in your specific circumstances. Call them at 1-800-CALL FHA.
Do you have questions about the FHA loan program? 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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