July 25, 2018
How many FHA mortgages can I have? This question is often on the minds of those who are interested in buying an investment property using an FHA mortgage. Understanding the FHA loan rules in this area can save a potential borrower a lot of time.
FHA Home Loans For Investment Property?
FHA home loans cannot be used for investment properties. In this context, the phrase “investment property” refers to a single-family home with between one and four units that the borrower does not intend to personally occupy.
It also refers to any type of intermittent-occupancy property such as a bed-and-breakfast, condohotel, or other property that is not primarily residential in nature and that the borrower won’t personally live in as her or his home.
FHA Loan Rules For Occupancy and Renting
The FHA loan handbook, HUD 4000.1, states clearly that at least one borrower obligated on the FHA home loan or refinance loan must live in the home in order to get the loan approved.
HUD 4000.1 does NOT forbid the borrower from buying a multi-unit home (up to four units) that is primarily residential and renting out the unused units the borrower does not live in.
A borrower may or may not be able to include potential rental income from the home depending on lender requirements and whether the borrower has prior experience as a landlord and can document that experience for the lender.
Occupancy is a requirement, which is why time shares, businesses, frat houses, hotels, B-n-Bs and other types of more commercial properties can’t be approved for an FHA single family home loan.
Can An FHA Borrower Get More Than One FHA Mortgage?
In general, the FHA does not approve loans if the borrower is already obligated on another FHA mortgage, but certain exceptions apply.
A change in family size, a job requirement that forces the home owner to relocate (a certain minimum distance from the original home is required) or a co-borrower on an existing FHA mortgage that wants to own her or his own property may be allowed.
Getting approved for the second FHA home loan will be dependent on the borrower meeting FHA loan standards and the individual lender’s requirements. The exceptions allowed by the FHA loan rulebook may not be allowed by lender standards depending on circumstances.
The borrower will also need to demonstrate that the second FHA loan is affordable in addition to the original mortgage, so it’s easy to see that there are several variables at work in such situations.
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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