FHA Loan for a Second Home: Requirements & Conditions

“Can I get an FHA loan for a second home?” is a common question among homeowners wanting to purchase a secondary property as their primary living space. In this guide, you’ll learn all about getting an FHA loan for a second home, including the requirements and conditions.

What Is an FHA Loan?

Many people use FHA (Federal Housing Administration) loans to purchase their first homes. Acquiring a dream home becomes more accessible to first-time homebuyers with an FHA loan. Qualified applicants must have a decent credit score and make a small down payment.

Although FHA loans are always associated with primary residences, many property owners ask, “Can I use an FHA loan to buy a second home?” The answer is yes, but you must meet several eligibility requirements and follow the FHA’s conditions. While getting an FHA loan for a second home is possible, you cannot use it for investment or vacation purposes; circumstances must show that you cannot stay in your first home anymore.

FHA Loan Eligibility for a Second Home

You may expect a penalty for being a second-time homebuyer looking for an FHA loan, but don’t worry. The FHA considers second-time homebuyers even if they already used an FHA to pay for their first property. These loans are for borrowers who will use the acquired property as their primary residence, not to make money on rentals, as an investment, or for other related reasons.

FHA Loan Eligibility for a Second Home

You don’t need to sell your first home before acquiring the second through an FHA loan. You could be in the process of job relocation, getting a divorce, or needing space for a growing family. You’re eligible to receive an FHA loan for a second home if the following applies to you:

• You can prove you’re eligible for an FHA loan for a second property.
• You can afford the loans and mortgages associated with the first and second homes.
• You have a low outstanding balance on your credit cards (less than 30%).
• You will occupy the second home as your primary residence within 60 days of closing.

FHA Loan Requirements for a Second Home

Regarding an FHA loan for a second home, the following requirements and conditions are helpful to know before diving into the process:

• The new residence must be at least 100 miles away from the old one.
• The current property must have an LTV (loan-to-value) ratio of 75% or less.
• Your situation has changed or is changing to the point of having to move into a second home.
• Your credit score must be 580 or better.
• You can’t have any recent foreclosures or bankruptcies.
• You have proof of consistent income and employment.

FHA Loan Conditions for a Second Home

Can you get an FHA loan for a second home? Not everyone is eligible for this program because you must have a good reason for no longer staying in the home you bought with your first FHA loan. You should be able to make down payments and have a solid credit score to move forward. The FHA allows you to buy a second home for main living purposes but will not help you fund a second home to rent for money or as a vacation home.

Here are some ways you’d qualify for an FHA loan for a second property and how you’d be an exception to the guidelines.

Job Relocation

You needed to relocate for a job change, such as being moved to another branch or getting a promotion. If you can’t reasonably commute to your employer, you could be eligible for an FHA loan for a second home. You don’t necessarily need to sell the first home to live in the second one and don’t need to move back into it as your primary home.

The rule is that there must be at least a 100-mile distance between the two properties. There are some extreme cases where you could still qualify when the homes are closer. You might also be able to rent out the first property while living in the second.

Increase in Family Size

Has your home become too small for your family? If your family is growing, your current home may be unsuitable to meet these demands.

Cosigner for Another Property

You may be eligible for an FHA second-home loan if you cosigned someone else’s FHA loan but didn’t live in the property, though it’s essential to check with your lender for specific requirements regarding cosigners on FHA mortgages.

Vacating Jointly Owned Property

You could qualify if you’re going through a divorce and are no longer living with your former spouse. You might have also bought the home with a family member or friend, but someone is ready to move on.

Bottom Line

Having assistance in financing your dream home and getting a second chance at the opportunity can be a game changer. Whether you’re expanding your family or making a fresh start, an FHA loan for a second home could change your life.

Now that you know the requirements and conditions of getting an FHA loan for a second home, consider your situation to see whether this is a suitable next step to take. At Champions Mortgage, we can help you find a loan officer or calculate your mortgage. If you need professional assistance and guidance on applying for an FHA loan on a second home, call our business in Sugar Land, TX, at (281) 727-2500.