FHA HOME BUYERS HAVE MORE THAN 1 FHA MORTGAGE
To prevent Florida investors using FHA as a tool to squire investment homes FHA generally will only allow one FHA mortgage for any borrower.FHA will not insure a Florida mortgage if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining Florida investment homes, even if the property to be encumbered will be the only one owned using FHA mortgage insurance. Any person individually covered by a FHA mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with an FHA mortgage insurance except under certain situations described below.
- The FHA does not object to Florida home buyers using FHA mortgage insurance more than once if compatible with the home buyer’s needs and resources as follows:
A) Relocation. If the FHA mortgage applicant is relocating and re-establishing Florida residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another Florida FHA mortgage and is not required to sell the existing Florida home covered by an FHA insured mortgage. The relocation need not be employer mandated to qualify for this FHA mortgage 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.
B) The Increase in Family Size. The FHA mortgagor may be permitted to obtain another Florida home with an FHA insured mortgage if the number of legal dependents increases to the point that the present Florida home no longer meets the family’s needs. The borrower must provide satisfactory evidence of the increase in dependents and the property’s failure to meet the family’s needs. The FHA mortgagor 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 Florida home appraisal must be used to determine LTV compliance. Tax assessments and realtor market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance.
C) Vacating a Jointly Owned Florida home. If the FHA mortgagor is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property.
D) Non-Occupying Florida Co-Borrower. 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 an 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”.
Considerations in determining the eligibility of a borrower for one of these exceptions are the length of time the previous property was owned by the borrower and the circumstances that compel the borrower to purchase another residence with an FHA insured mortgage. In all other cases, the purchasing borrower either must pay off the FHA insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA insured mortgage.