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Does FHA ever approve a loan on a home when another is already owned?

I purchased a home 5 years ago on my own. Then I got married this year. We are looking for another home so we can start our family(this home too small). I owe 81K on the home it might be worth 70K now...So selling is out I feel cause we dont have 10K to cover the excess..so I thought we could rent our home and qualify for an FHA loan...Any suggestions on what to do?

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February 08 2011 - US
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Answers (26)

Not sure if you found what you need yet.  But as a mortgage broker I can say that we can do loans down to 580 as long as certain conditions are met.  So with your score below 640 it might not be a problem. 
What you need to do is go to this web site:
http://www.namb.org/assnfe/SearchBroker.asp?SnID=1424092886
and search for a reputable broker in your area.  Also maybe check around with a few realtors and see who they suggest.  You need a broker who knows what they are doing.
Your total debt load will determine if you and your new husband can be on the loan together or not.  If that broker requires a 640 then they should be good enough to tell you what to do to get your score up and quickly.  FHA does allow you to own many properties as long as they do not have an FHA loan on them if they are close to where you are buying.  The same is for VA.  The only program I know that says you can not OWN another property is a rural development loan called and ran by USDA.  Email me if you need futher help.  Good luck from Alabama.
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February 09 2011
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No I do not live in a community property state. For those of who have already answered I contacted the lender I was was dealing with and it is an internal policy that they have to not approve the loan since I already own another with no equity in it. so I guess now my next step is to find a lender that will? Any  suggestions on where to look...I live in arkansas
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February 09 2011
Sammie -

What state are you trying to purchase in?   If it is a community property state, FHA will require that YOUR debts count against your husbands qualifying ratios if he applies in his name only.   This can make things difficult on his solo application because your debts will count against him but your income will not count for him.

So if you are in community property state, my guess is you will need to improve your FICO score so that you can apply jointly for the new FHA purchase.   Where are you scores currently?   There might be other options for FHA lenders that will allow your scores to be eligible.  
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February 09 2011

Sammie,
If your husband is using his income and assets or receiving a gift for the downpayment and can qualify on his own then he can get an FHA mortgage for the purchase of a new primary residence.

The liablities that his debt to income will be calculated on will be those that are on his credit report. He shouldn't run into any issues with the fact that you own a property that your family currently resides in. The only time this will be an issue is if your buying down in value. The UW may suspect that a buyer is attempting to purchase an investment property that wouldn't be owner occupied.


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February 08 2011
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I think it is just that I have quite a few things on my credit..my balances are high.no late payments...I will try to contact a diffrent lender tomorrow and see if they can do the loan......My big hurry is that I had found my "dream home" for 105K (nice home,investor selling) it had been listed forever it sold last week for 60K!! I am just sick over it..So i want to have financing lined up incase I come across another faily soon
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February 08 2011

Not all lenders will do this purchase.  Your lender may be one of those.  It is a good idea to try and improve your credit score.  Why is your score less than 640?

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February 08 2011
IF your husband qualifies on his own he/you should be ok.  Have him conduct the purchase. 

IF you are on the loan you will need to qualify with both payments and include all your debts. 
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February 08 2011
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Ok so here is wher now i dont understand why the guy said no and it gets confusing but ill do my best....
The home we are in now is "mine" conventional loan
all CC and car debt is "mine"
Nothing is in my husbands name
So turns out that his middle score is over 640 mine is not(I was shocked)
The lender said we could do the new loan in just my husbands name but as soon as he asked me if we were going to sell the house and I said no he said that FHA would not let us have 2 homes because of the fear factor of walking away.Should I try to deal with someone else?? so confused
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February 08 2011

If you are at 40% carrying both you shoudl not have any issues getting approved.  If you posed the question the way you did on this thread they may have thought your existing mortgage was an FHA loan.

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February 08 2011
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Ok so I can have both since the old one is NOT FHA...but as far as debt-to-income will need to be at 40% or below with both houses and other debt.Is this correct what I am saying? If so I wonder why the guy said no...
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February 08 2011

FHA does not limit you to one property.  The limit you to one FHA insured property.

You will need to qualify carrying both properties, without rental income from your departure residence.

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February 08 2011
Missed that your current loan was not FHA...We posted at the same time!  Sorry Robin!
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February 08 2011
Since Robin didn't look up the guideline.  I will provide it... hud handbook http://www.fhaoutreach.gov/FHAHandbook/prod/collections/current/print/4155-1_4.pdf Page 34.

You will have pay the mortgage down to 75% of the appraised value.
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February 08 2011
Sammie,
I am not licensed in Arkansas.  Your best bet is to find a good mortgage broker that has several lenders they work with.  I have been successful with these purchases.  It must make sense.  My borrowers were buying nicer homes that were larger and accomodating a marriage or just a growing family.  Best of luck!
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February 08 2011
Look up the guideline Robin...It is not an overlay!
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February 08 2011
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Yes Robin can u do loans in Arkansas? Obviously it all makes sense to me and is nessacary....At least I am not trying to walk out on my current loan...I just need someone to see it my way and say ok.
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February 08 2011
sounds like Robin may be just the lender to be able to help you pull this one off...I'd love to hear the end results...keep us posted and send pix of your new home
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February 08 2011
Some lenders have investor overlays and will not do this purchase.  If you are moving up and the purchase makes sense for you to do this you can and there are lenders that will finance this purchase.  You do not need to pay the current loan on your existing property to 75%.  You need good reasons why you need a new home.  If the rental prospects are good for your current property it makes sense you keep it rather than selling at this time.  These are considerations that lenders look at when approving this purchase.  
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February 08 2011
you will also need to pay the loan on the existing home down to 75% loan to value...If you don't have the 10K you will not have enough to pay it down to 75% LTV.  

You will not be able to obtain a 2nd FHA loan.  I that's not what you want to hear but it is reality.
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February 08 2011
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Ok my home right now is not an FHA loan..but FHA is my best option for a new loan due to the downpayment. I spoke with a lender today that said flat out with this house that he would not be able to help. So I didnt know if that was just his lending requirements or that of all lenders out there
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February 08 2011
Not a dumb question at all sammie. The guides for FHA do leave some room for interpetation,..which can work against you. FHA simply says it will dotti. However the lender may say,..if it's you, your husband and a baby,..2 bedrooms rooms is enough.

If I were you I would not trust a pre-approval unless you had your Loan Officer bring your scenario to an Underwriter AND a Manager and put it in writing that this was discussed up front. Nobody can guarantee a closing,...but at least you will hedge your bet.
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February 08 2011
You will have to have a signed lease in place with your tenant, show a statement of their rent monies deposited into your account.  You will need to have 6 months reserve rent monies on the existing property and an adequate amount available in your account in the event of an issue occuring for the new house you are planning to purchase.

The banks are very leary as some folks think they can pull a strategic default after purchasing something for less now.

You are in an FHA and you want to buy another home for less today with only 3.5% down FHA loan?  You'd better be able to show the pregnancy test
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February 08 2011
Yes you can do this.  You must present a letter of explanation that makes good sense as to why you are purchasing a new home.  Generally you may want a larger home, live closer to work, or move to a better school district.  These reasons are good and you must indicate you plan to rent your current residence.
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February 08 2011
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Robert

What would outgrown have to be u think? Right now we have 2 bed/1 bath..Me,my husband, 2 cats , 2 dogs.U think we could say we've "outgrown" for a baby....? Sounds dumb but just asking
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February 08 2011
Thomas,
Sammie is asking mortage professionals,..like the 1000 of us on this board with years of experience. Please stick to the Real Estate section.

Sammie,
FHA does allow you to purchase another FHA property if your family has out grown your current residence. You will have to prove this, but it is possible.
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February 08 2011

My best advice for you is to talk to your local Mortgage Professional.

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February 08 2011
 
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