Can I buy a FHA Single Family home while keeping my FHA 2 Unit home?

Asked by Erick T, Los Angeles, CA Fri Dec 7, 2012

I bought a my first home and current residence (two units) in 2010 while I was single. I now married and planning of raise kids. We would like to buy a second home that is bigger.

Can I keep my 2 unit as rental property and buy a second house on FHA? or do I need to sell it first?

Also, I'm planing on refinancing my 2 unit home to a lower interest. Will that affect my first question?

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Mon Dec 10, 2012
Hi Erik,

If you refi your current home, you'll have to do it as an investment property which is fine with an FHA streamline.

The bigger question is whether or not you qualify for one of the few FHA exceptions that will allow a person to have more than one FHA insured mortgage at a time. See below.

HUD-4155.1 REV-5, paragraph 1-2

Principal Residences

Question 50: If my principal residence is currently covered by an FHA-insured mortgage, can I purchase another principal residence with an FHA-insured mortgage?

Answer: Only under the following situations described below:

a) Relocation – Relocating to another area not within a reasonable commuting distance from the current principal residence. There is no need to reduce the principal balance. Reference to HUD Handbook 4155.1, 4.B.2.d and Mortgagee Letter 2008-25.

b) Increase in Family Size AND the outstanding mortgage balance on the present property is paid down to 75 percent or less LTV exclusive of any financed MIP.

1 – A current residential appraisal must be used to determine LTV compliance.
2 – The borrower must provide satisfactory evidence of the increase in dependents and how the property no longer meet the family needs. See Handbook 4155.1, 4.B.2.d.

c) Vacating a jointly owned property; Please Note: Situation cited in HUD Handbook 4155.1, 4.B.2.d. is only meant to be one example of an acceptable situation.

d) Non-occupying co-borrower; On a case-by-case basis, a relative could be a non-occupying co-borrower on more than one FHA-insured property. For example, Mom and Dad are non-occupying co-borrowers on both son and daughter’s FHA-insured mortgages. Reference Handbook 4155.1, 4.B.2.d.

Please feel free to contact me for more information or help. You can also find info on my FHA Mortgage website by clicking the link below.

John Burke
Senior Mortgage Banker
Peoples Bank & Trust
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