Having More Than One FHA Loan

FHA Home Loans are a great program for home buyers looking for underwriting flexibility in NC.  Underwriting for the program actually encourages “Common Sense,” and previous credit issues, low down payments, low FHA PMI rates, the ability to add a co-borrower and the ability to combine the program with the NC Affordable Housing Program make it very attractive.  The FHA Home Loan Program is designed only for Owner Occupied Properties, however, there are instances where you could end up having more than one FHA Loan in NC at the same time.

Relocations: In many situations today, we see people who are moving to find employment.  If the home you are leaving behind has all of the payments being made on time, you haven’t been a modification during the last 12 months – perhaps through a renter, then you might qualify to purchase another home in NC using the FHA Program.

If you own a home in Charlotte that has a FHA Home Loan on it – and you take a job in Raleigh, this totally works.  If you own a home in Charlotte with a FHA Home Loan on it, and you take a job in Monroe – then it’s a little more difficult to make the argument (Make Sense?)

FHA Guidelines expand on this and further state that, “The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage. ” 

Starting in September of 2015 – the FHA Mortgage Requirements add that “If relocating for employment, the commuting distance between the old residence and new residence must be more than 100 miles.”

We’ve actually had the latter situation, where someone left NC to find a job in Iowa, renting out their home in Charlotte that had a FHA Home Loan on it. Three years later, they were able to find a better job, in the same line of work – back in the Charlotte area.  They had family here, and wanted to return.

Although they’d been renting in IOWA, and owned a home in Charlotte that they were currently renting out – we were able to make them another loan in Charlotte with a FHA home loan to buy a new home.

Increase in Family Size: Let’s say you are a single parent, who marries another single parent… and let’s say your new spouse already owns a two bedroom Town home in Raleigh, and when your kids come over to spend the weekend – it’s tight.  FHA understands that 6 or 7 people in a two bedroom apartment is not going to work.  It’s part of the “Common Sense” underwriting that is done with the program.

Here’s the kicker.  They want you to increase the equity in the property you will be renting out.  This is because so many people across the country have just walked away from their “old house” to buy the new one.  In NC that’s not as common – but the FHA guidelines don’t read, “Except in NC.”

FHA Underwriting guidelines state: “The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance. ”

Vacating a Jointly Owned Property (Read Divorce): This is similar to the VA Home Loan guidelines about divorce.  Again, FHA will allow you to buy another home, even one that is close to the other one, if there’s a divorce.  QUALIFYING for that FHA Mortgage loan as a single parent might be a little tricky… but FHA will allow you to buy another one.  You will need to provide us with solid, recorded documentation that you are separated, or divorced. If separated, you will need to provide “Free Trader” information indicating that you can purchase another residence without your spouse.

Non-Occupying Co-Borrower:  MANY Loan Officers get this one wrong!  If you are going to be a non-occupying co-borrower, helping a child or another relative purchase a home… you can do that EVEN IF your current mortgage is a FHA loan.

A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage. (See HUD Handbook 4155.1 for additional information). Under no circumstances may investors use the exceptions described above to circumvent FHA’s ban on loans to private investors and acquire rental properties through purportedly purchasing “principal residences”.

EXCEPTIONS / Weird Things We’ve Seen

The VERY LAST sentence of the directive from FHA says (essentially)  If you have one FHA Mortgage, and you want to get another one… and you don’t meet one of these conditions – then you will need to terminate your ownership of that other property.  Here’s what we had… a woman bought a home 3 years in Cary with a FHA loan.  Then she got married, and had a child.  It’s a 3 bedroom house.  They wanted to rent the house out, and allow the Husband to buy a home with a FHA loan.  The underwriter said because he was on TITLE – not actually obligated on the Note for making the payments, he had to quick claim his interest to his wife before we could do it.

If you or someone you know is considering purchasing a home in Raleigh or Cary  and you have questions about having more than one FHA Loan– please call Steve and Eleanor Thorne  Government Loan Experts in Raleigh, NC  919-649-5058.  We offer today’s lowest mortgage rates!