Two FHA mortgages at the same time?

Is it possible to have two FHA mortgages without jumping through a lot of hoops? Maybe. Under the old rules HUD required: the homes to be a primary residence and at least 50 miles apart, an increase in family size, or for medical reasons such as the homeowner was currently living in a two story and needed a ranch style residence because they could not handle the stairs. The reason for this was simple. HUD did not want to see people “empire build” with FHA mortgages.

The new guidelines state that a borrower can purchase an FHA-insured primary residence, then rent out that primary residence and re-establish another primary residence after 12 consecutive months. They can purchase a second primary FHA insured primary residence without meeting the relocation or other tests. Remember that a borrower must occupy a property for at least one year when they utilize an FHA mortgage, unless there are unforeseen circumstances beyond the borrower’s control. An example would be some one who takes out a FHA mortgage for purchase or refinance and two months later finds out their employer is relocating out of state.

A perfect example of who this will help is a family who wanted to change school districts and be closer to mass transit. They were “upside down” on their existing home by over $30,000 and did not want to ruin their credit by doing a short sale. They rented out their former home and leased a new one. Their existing residence has a FHA mortgage. Under the old rules they would have had to wait until they could come up with a higher down payment for a conventional mortgage, which would take a long time. Under the new rules, they only need to show they have not occupied the property in the last 12 months. I should mention that the family that rented their house was smart enough to obtain professional advice about leasing out the former home. If you do not have experience or education in property management, you should hire a professional to lease your property. For every success story I hear about amateurs who play landlord, and get lucky, I hear at least four horror stories, often with the property ending up in foreclosure.

This new rule is a good example of common sense that benefits both tenants and owners. The benefit to the tenants is that their landlord does not have to displace them to obtain a new FHA loan. Interested in your thoughts and comments, as always.

Best, Chip

Chip Allen

Crestline Mortgage Bankers

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