Taking Out Multiple 203k Loans: What You Need to Know
The 203k loan is a subtype of the standard FHA loan, or 203(b). What this means is that most of the rules that apply to other types of FHA loans also apply to 203k loans. In most cases, you are only allowed to have a single FHA loan at one time. This is especially the case for 203(k) loans, since additional funds for home renovations have been added to the total loan amount.
However, there are a few potential loopholes that might allow someone to have more than one FHA loan at a time. Note that these situations are not true across the board, and will vary by lender and other factors.
You Don’t Call It Home: If you are the co-borrower on an FHA loan, but have never lived in the home in question, you may be able to apply for a second FHA loan. However, you will need to prove that you do not live at the other address.
Evolving Family Needs: If you purchased your current home with an FHA loan, but it no longer meets your needs because your family has grown, it is possible to take out another FHA loan. However, there are strict requirements in terms of loan to value ratio. The new property cannot exceed 75% of the value of your current home, and that value must be determined by an appraisal as well as comparing the totals to the balance on your current mortgage.
You’re Pulling Up Roots: Many people must relocate for employment-related reasons, and the FHA takes this into account. If you’re moving because of something to do with work, and the new location is more than 100 miles from your current residence, it’s possible that you’ll qualify for a second FHA loan.
You’re Moving Out: Are you leaving your current residence and not returning? If you’re a co-borrower on an FHA loan, this can be grounds to allow you to apply for a second FHA loan on another property.
Is it worth it to try to take out another FHA loan, though? It could be, but there are some downsides. The most important to understand is that all FHA loans require you to pay a mortgage insurance premium, and that cost can add up quickly with more than one loan.