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2. Eligibility Requirements for Principal Residences

Change Date

March 29, 2010


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4.B.2.dd. Exceptions to the FHA Policy Limiting the Number of Mortgages Per Borrower

The table below describes the "exception" situations in which FHA does not object to borrowers obtaining multiple FHA-insured mortgages.


Note: Considerations in determining the eligibility of a borrower for one of the exceptions in the table below include the


  • length of time the previous property was owned by the borrower, and
  • circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage.

Important: In all cases other than those listed below, the borrower is not eligible to acquire another FHA-insured mortgage until he/she has either


  • paid off the FHA-insured mortgage on the previous residence, or
  • terminated ownership of that residence.
Policy Exception Eligibility Requirements

Relocation

A borrower may be eligible to obtain another mortgage using FHA insurance, without being required to sell an existing property covered by an FHA-insured mortgage, if the borrower is


  • relocating, and
  • establishing residency in an area not within reasonable commuting distance from the current principal residence.

If the borrower subsequently returns to the area where he/she owns a property with an FHA-insured mortgage, he/she is not required to re-establish primary residency in that property in order to be eligible for another FHA-insured mortgage.


Note: The relocation need not be employer mandated to qualify for this exception.

Increase in family size

A borrower may be eligible for another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house 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 family needs, and
  • the LTV ratio based on the outstanding mortgage balance and a current appraisal equals 75% or less. If it does not, the borrower must pay the loan down to 75% LTV or less.

Note: A current residential appraisal must be used to determine LTV compliance. Tax assessments and market analyses by real estate brokers are not acceptable proof of LTV compliance.

Vacating a jointly owned property

A borrower may be eligible for another FHA-insured mortgage if he/she is vacating a residence that will remain occupied by a coborrower.


Example: An example of an acceptable situation is one in which there is a divorce and the vacating ex-spouse will purchase a new home.

Non-occupying coborrower

A borrower may be qualified for an FHA-insured mortgage on his/her own principal residence even if he/she is a non-occupying coborrower with a joint interest in a property being purchased by other family members as a principal residence with an FHA-insured mortgage.

Important: Under no circumstances may investors use the exceptions described in the table above to circumvent FHA's ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences."

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