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FHA Loan Rules For Purchasing A Second Home: A Reader Question

April 28, 2015

105A reader asks, “I applied for a fha loan my contract on the house I am to purchase expires Thursday. I found out Wednesday night that I have to apply for an exception for the 2 fha loan rule and the house I am currently in and have on the market is a fha. I did not know this.”

“I qualify for both loans but have no clue how to apply for an exception. I am sure I should be able to get it as I travel 1 hr 10 mins to 1 hr 40 mins each way to work due to traffic increase over the years and the new home is only 10 mins from work. Help! My lender is now help and has dragged this on for several days. I am in danger of losing all my earnest money and the cost I have paid for inspection and appraisal.”

FHA loan rules state:

“To prevent circumvention of the restrictions on FHA insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable).”

“Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below.”

That information is found in HUD 4155.1 Chapter Four Section B. The exceptions mentioned in the quote above include the following:

“A. Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by an FHA insured mortgage.”

“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.” Other reasons an exception may be approved include increases in family size, or a borrower who is vacating a jointly owned property.

The reader question indicated that the borrower had trouble getting assistance from the lender for this exception. In cases like these it may be a good idea to contact the FHA directly at 1-800 CALL FHA and request assistance with your situation.

Do you need answers to FHA home loan questions? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

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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