April 26, 2017
Are FHA loans for multiple properties possible? That’s what’s on one reader’s mind recently. “So is there a maximum number of properties one can theoretically have under FHA guidelines?”
“Say for example a person owns a home in one city with an FHA mortgage and then has to relocate to another city for job reasons. While in this city there family size increases by several individuals via marriage and or kids. Would that person be able to get a 3rd FHA? mortgage.”
This reader question about FHA loans is in response to a blog post we did recently about the issue of applying for another FHA mortgage while currently paying on an existing FHA home loan. The gist of that post is that while FHA loan rules do not generally allow a borrower to get another FHA mortgage, two FHA loans may be possible if the borrower meets certain exceptions such as a change in family size, job relocation, etc.
The language of HUD 4000.1 seems to imply that two loans is the maximum:
“FHA will not insure more than one Property as a Principal Residence for any Borrower…(editor’s note: except for situations mentioned above and others listed in HUD 4000.1) 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.”
But before this rule comes into play, it is entirely possible that the debt-to-income ratio question might address the entire reader question first. The lender is required to insure the borrower’s outgoing debt (including the proposed amount of the new monthly mortgage payment) does not exceed a certain ratio.
If a borrower is paying multiple mortgages, it makes the debt to income question very important. If the borrower’s debts exceed a certain percentage of the income, the lender cannot approve the new loan application unless there are “compensating factors” that might work in the borrower’s favor.
Such instances would be handled on a case-by-case basis; state law and lender standards would also have a say.
In short, the quick answer is that FHA loan rules are not designed to permit second loans except in very specific circumstances and third loans seem out of the question based on the language of HUD 4000.1.
That said, borrowers should feel free to discuss their needs with a lender to see what may be possible. Each FHA loan is handled individually and depending on circumstances there may be alternatives to pursue.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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