April 6, 2011
In our last blog post we discussed FHA loans and whether a borrower can apply for a second one while maintaining the first. This situation is different than refinancing or getting a second mortgage–the situation in question involves the borrower’s ability under FHA regulations to buy another property with a new FHA insured loan.
The FHA only allows this under specific circumstances. For example, a borrower who relocates to a new area outside a “reasonable commuting distance” may be allowed to apply for a second FHA loan to buy a new property in the new location.
In such cases the borrower is allowed to apply for a new loan but isn’t forced to sell the old property. This makes the old home a possible rental unit under the right circumstances–the FHA may allow such use of the home in these cases if the situation meets FHA guidelines, but the rules forbid using a second FHA loan to specifically purchase investment properties. Rental issues in such cases are controlled by FHA requirements–borrowers may only rent the old home under the right circumstances.
The FHA rules add, “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.”
Another scenario where the FHA might approve an additional home loan is when there is a documented increase in family size that would require a home suitable for the new number of occupants.
If the original home no longer meets the borrower’s needs, a new FHA mortgage for one that does can be approved, but the borrower must “provide satisfactory evidence of the increase in dependents and the property’s failure to meet the family’s needs.” In these cases the borrower is required to pay the original
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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