Hurdles trying to obtain FHA loan in MA

[Nick Miano]

Hello,

I live in Massachusetts and currently have a loan out on my primary residence which is a 2 bedroom condo. I recently applied to get pre-approved for an FHA loan to purchase a multi-family home which I was going to move into as my new primary residence. The loan was denied because of the below clause:

(b) FHA-Insured Mortgages on Principal Residences

FHA will not insure more than one Property as a Principal Residence for any Borrower, except as noted below. 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

I know a lot of people use FHA for multi-family but is it always the first loan they take out? Has anyone else ran into this hurdle? Any way I can still use an FHA loan without paying off the entirety of my current loan first? Is this something lender specific?

Thanks!