How To Qualify For a Second FHA Mortgage

The Federal Housing Administration (FHA) offers mortgage financing for owner-occupied one to four family dwellings. Typically, an individual can have only one FHA mortgage at a time. In certain circumstances, homeowners may qualify for a second FHA mortgage without having to pay off their existing mortgage. Although, alternative financing should be the first choice for a current homeowner financed through the FHA. If the current homeowner is able to qualify and they need FHA financing due to its more flexible qualification standards, there are provisions which allow an individual to obtain a second FHA mortgage. The following list details exceptions to obtaining a second FHA mortgage.

• Relocation - If the current homeowner with FHA financing must relocate to a new location which is beyond a reasonable commuting distance from their original FHA financed house. Although each lender may make the determination of what a reasonable distance would be; most lenders would likely consider a hundred mile or greater commuting distance as excessive.

• Non-Occupant Co-Borrower - The FHA's guidelines allow non-occupant co-borrowers to help a family member qualify for the purchase of a property. In this situation, the non-occupant co-borrower may still qualify for another FHA loan to purchase a home if it is their primary residence.

• Divorce or Separation - If the situation arises where two individuals purchased a property jointly, but decide to separate or divorce. A second FHA mortgage would be allowed as long as the borrower can provide legal documentation, such as a divorce decree or separation agreement documenting that the other borrower has been awarded the current FHA financed property. In this situation, a borrower may use FHA financing to purchase their new primary residence.

• Increased Family Size - If an individual currently owns a home with FHA financing and is able to document the need for a larger residence due to their increased family size. The homeowner must document that their family size has increased since the purchase of their existing dwelling and that it no longer meets the needs of their household. Typically, birth certificates and/or marriage certificates serve as acceptable documentation to verify the larger family size. This exception is subject to evidence that the existing FHA financed home has at least 25% equity. Lenders will require proof of the equity position in the current FHA financed property via appraisal. Unless the borrower can provide proof their current mortgage is no greater than 75% of the value of the property, a second FHA mortgage will not be permissible.

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