Understanding The FHA 100 Mile Rule: How It Impacts Your Ability To Get Multiple FHA Loans

Q: Can I get conventional loans along with my FHA loan?

Yes. Even after obtaining an FHA loan, you can still apply for—or hold—a conventional loan if needed.

Q: How does the rule impact my ability to get multiple loans?

The 100-Mile Rule determines whether you can use rent from your current FHA-financed home to qualify for another loan: only moves more than 100 miles away allow that rental income to count. For moves within 100 miles, the rent cannot be used unless you qualify while carrying both payments.

Q: What happens if I want to buy a house closer than 100 miles but still need another loan?

If the new home is within 100 miles and you need rental income from the current property to qualify, a conventional loan may be the better option because it is not subject to the FHA 100-Mile Rule.

Philip Bennett (NMLS # 1098318)
Oct 21, 2023
11 min read

Updated: Jun 30

Understanding The FHA 100 Mile Rule: How It Impacts Your Ability To Get Multiple FHA Loans

Navigating the landscape of home loans can be a complex task, especially when considering options like FHA loans. Though attractive for their low down payment, the FHA has guidelines such as the 100 Mile Rule that may impact your ability to get multiple FHA loans.

In this post, we’ll break down what the FHA 100 Mile Rule is, how it works, and how it can affect homeowners who wish to convert their current residence into a rental property while financing another home with an FHA mortgage.

Ready to learn? Let's dive right in!

If you're considering an FHA loan in Florida and need expert advice, don't hesitate to schedule a consultation with our team at Bennett Capital Partners Mortgage

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Key Takeaways

✅ Under FHA guidelines, you generally cannot use rental income from your departing residence to qualify for a new FHA-insured mortgage when the next home is within 100 miles—unless you document at least 25 percent equity in that first property, in which case the rental income may still be counted.

✅ Homeowners may need to sell their current property if they want to purchase a new home located less than 100 miles away, as rental income from the current home cannot be used to qualify for a new FHA loan.

✅ FHA offers four “inside-100-mile” exceptions (family-size increase, divorce/legal separation, relocation, and non-occupant co-borrower) that let you hold two FHA loans; however, in those cases, you still cannot count rent from the first home.

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What is the FHA 100 Mile Rule?
Exceptions to the FHA 100 Mile Rule
Utilizing Multiple FHA Loans for Rental Properties
Conclusion
FAQ's

What is the FHA 100 Mile Rule?

If you’re considering buying a new home but already have an existing FHA loan, you might be wondering whether it's possible to qualify for a second one, especially if you plan to use rental income from your current home. The FHA 100 Mile Rule is an essential guideline for borrowers who wish to take out a second FHA-insured mortgage.

To apply rental income from your current home toward the new loan, FHA gives you two distinct eligibility paths:

Relocation Test – If the new principal residence is more than 100 miles from the property you are vacating, the rental income may be counted once you document a signed lease and a fair-market-rent appraisal.

Equity Test – If the new residence is within 100 miles, you may still use the rental income provided you document at least 25 percent equity in the departing home with a full appraisal and obtain a lease.

If the new property is fewer than 100 miles away and your equity in the departing residence is below 25 percent, the rental income cannot be used for qualification. In that case you must qualify while carrying both mortgage payments or pursue an alternative financing strategy (e.g., conventional refinance of the existing home).

The FHA 100 Mile Rule's Impact on Using Rental Income from a Current Residence

If your new home is less than 100 miles away, the FHA 100 Mile Rule prevents you from using rental income from the first property to qualify for the new loan unless you can document at least 25 percent equity in that departing residence; if the equity test is not met and you cannot qualify while carrying both mortgage payments, selling the current property (or refinancing it into a conventional loan) may be the most practical solution.

Selling the home allows you to free up your FHA eligibility for the new purchase.

This rule ensures FHA loans are primarily used for owner-occupied homes and prevents homeowners from leveraging multiple FHA loans to build rental portfolios in close proximity.

Dealing with the FHA 100 Mile Rule was a major concern for me as I needed to rent out my existing home in Fort Lauderdale and buy a new one in Orlando. Bennett Capital Partners Mortgage made what seemed impossible, possible. They expertly guided me through the process, ensuring I could use my rental income effectively for my new FHA loan. Their knowledge and support were invaluable." - Carlos G., Fort Lauderdale

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When Selling Your Current Home May Be Necessary

If your new home is less than 100 miles away, selling your current property may become a necessary step. Unless you document ≥ 25 % equity and a one-year lease, in which case up to 75 % of market rent may offset the departing-home PITI.

Although the FHA does not require a forced sale, selling may be the best option to meet loan requirements if you're unable to qualify for a second FHA mortgage.

Navigating Lender Requirements When Your Home is Less Than 100 Miles Away

Securing a second FHA loan becomes more complicated when your new home is less than 100 miles away. Since rental income from your current property can't be used, you'll need to qualify by demonstrating the ability to cover both mortgage payments.

In some cases, converting your existing property into a rental may not be enough to bypass the 100 Mile Rule. It’s essential to work closely with a mortgage broker at Bennett Capital Partners to explore other options, such as applying for a conventional loan.

Converting Your Home with an FHA Loan into a Rental Property

If you want to turn your FHA-financed home into a rental, the FHA 100 Mile Rule still applies. To use rental income from your current home to qualify for another FHA loan, your new home must be at least 100 miles away.

This rule ensures FHA loans are used for homes you live in, not for creating rental properties nearby. It's important to understand this rule before making any decisions about converting your home into a rental property with an FHA loan.

It’s crucial to consult an FHA expert to understand how these guidelines might impact your chances of obtaining another loan.

📞 Call us now at 1-800-457-9057 or apply online to start your FHA Loans pre-approval.

Exceptions to the FHA 100 Mile Rule

While the FHA 100 Mile Rule sets clear limitations on using rental income from a current residence to qualify for a second FHA loan, there are certain situations where borrowers may still qualify for a second FHA-insured mortgage without selling their existing property. These exceptions apply to specific scenarios, though the 100 Mile Rule remains firm when it comes to using rental income.

Here are the key exceptions that allow borrowers to qualify for a second FHA loan without selling their first home:

HUD allows these four carve-outs, but many lenders layer on stricter rules—some require the first home to be sold, others bar any inside-100-mile scenario. Always ask your loan officer in advance whether they honor FHA’s exceptions or impose their own.

Understanding Rental Income Limitations Under the FHA 100 Mile Rule

When applying for a second FHA loan, it's important to know that you cannot use rental income from your current home if the new home is within 100 miles of it. The FHA 100 Mile Rule makes sure FHA loans are used for homes people live in, not for investment properties.

If you want to use rental income to qualify for the second loan, the new home must be more than 100 miles away from your current home and meet the 25% equity test. If the new home is closer, you may need to consider other loan options, as the rental income won’t be counted.

If you are in Florida, talk to a mortgage professional at Bennett Capital Partners Mortgage Brokers to help you understand how this rule affects your situation and find the best way to get your second FHA loan.

📞 Call us now at 1-800-457-9057 if you would like to discuss this in greater detail; we are available 7 days a week

Exploring Conventional Loan Alternatives to FHA's 100 Mile Rule

If you’re unable to meet the distance requirements of the FHA 100 Mile Rule but still need financing for a second property, conventional loans can offer flexible alternatives. These loans are not subject to the 100-mile limitation, making them an attractive option for borrowers who don’t wish to relocate far from their existing home.

Below are some conventional loan types and how they compare to FHA loans.

While these conventional loan options provide alternatives to the FHA 100 Mile Rule, it’s important to understand each one’s requirements and how they fit into your financial plan. Consulting with a mortgage professional will help you make an informed decision that aligns with your goals.

"As a first-time homebuyer in Florida, I faced a sudden job relocation and needed to qualify for a second mortgage using rental income from my current home. Since my new job was less than 100 miles away, I couldn’t use an FHA loan. Bennett Capital Partners Mortgage guided me through the process and helped me secure a conventional loan, allowing me to use my rental income and get the financing I needed for my new home. Their expertise made all the difference!" - Emily R., Tampa

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Utilizing Multiple FHA Loans for Rental Properties

If you're considering keeping your current home and applying for a new FHA loan to purchase a second property, it’s essential to understand the FHA 100 Mile Rule. This rule typically requires that your new home be located more than 100 miles from your current residence if you plan to use rental income from the first property to qualify for the second FHA loan.

In most cases, FHA guidelines are strict about this distance, ensuring that FHA loans are primarily for owner-occupied homes. If your new job or PCS orders move you more than 100 miles away, FHA lets you keep the first home and take a second FHA loan—as long as you satisfy the relocation paperwork and still intend to occupy the new property. (Note: the 100-mile rule isn’t waived to let you count rent when the move is closer.)

How to Use an FHA Loan for Your First Rental Property

When planning to convert your first home into a rental property using an FHA loan, it’s essential to know that FHA generally allows only one FHA loan at a time. However, if you are relocating and your new home is more than 100 miles away, rental income from the first property may be used to help you qualify for your second mortgage.

This can improve your debt-to-income ratio, making it easier to secure a new FHA-insured loan.

Guidelines for Obtaining Another FHA Loan

If you already have an FHA loan and want another, you’ll qualify only under one of FHA’s four exceptions. Relocation for work more than 100 miles away lets you keep the first home (renting it is optional) and take a new FHA mortgage; moves inside 100 miles can still qualify if your household has outgrown the home, you’re leaving a jointly-owned property after divorce, or you were a non-occupant co-borrower on the first loan.

Relocation and FHA: What You Need to Know

If you’re relocating for work or are active duty military personnel with a new duty station over 100 miles away from your current home, you may be eligible to secure another FHA loan without needing to sell your prior residence.

This means you can keep your first FHA loan (renting that home out and, when documentation requirements are met, count up to 75 % of its lease income) while purchasing a second home with a new FHA mortgage.

Mortgage Considerations for Multiple FHA Loans

When planning to take out multiple FHA loans, it's important to understand how mortgage insurance and your debt-to-income ratio are affected. If your new home is within 100 miles of your current residence, strict rules apply.

Rental income from the first property can be counted if the new property is more than 100 miles away to help qualify for the second loan, but it’s essential to talk to a mortgage broker at Bennett Capital Partners Mortgage Brokers to help navigate this.

📞 Give Us A Call Today 1-800-457-9057

Conclusion

To sum up, the FHA 100 Mile Rule is an important guideline for anyone looking to get multiple FHA loans. It restricts borrowers from using rental income on their current residence if they want to finance a new home with another FHA loan.

By enforcing this rule, the FHA aims to prevent people from taking advantage of the low down payment and other benefits of FHA loans for investment purposes. To fully understand how this rule may impact your ability to obtain multiple FHA loans, it's crucial to consult with a mortgage professional.

Commonly Asked Questions

What is the FHA 100 Mile Rule?

FHA will let you count rent from the home you’re vacating—and thus keep the existing FHA mortgage—only if the new principal residence is “in an area more than 100 miles” away from that home. If the move is within 100 miles, you can still keep both mortgages under certain exceptions, but the rent cannot be used to qualify.

Can I use an FHA loan to purchase another home?

Yes, you can use an FHA loan to purchase another home, but you must meet specific requirements such as the 100 Mile Rule if you wish to use rental income from your current home to qualify.

What does "rental income on a departing residence" mean?

Rental income on a departing residence refers to the income generated from renting out your prior residence. This rental income can be considered when qualifying for a new FHA-insured mortgage under the 100 Mile Rule.

Can I use rental income to qualify for a new FHA mortgage?

Yes, you can use rental income to qualify for a new FHA mortgage. The FHA 100 Mile Rule allows borrowers to include rental income from their departing residence when applying for a new FHA-insured mortgage.

Are there any exceptions to the FHA 100 Mile Rule?

These exceptions let you keep the first FHA loan and take a second one, but rental income from the departing home still cannot be counted unless the move itself is more than 100 miles (the standard “100-mile rule”).

Can I obtain a new FHA-insured mortgage if I am in active duty status?

Yes. Active-duty service members may secure a second FHA-insured mortgage when permanent-change-of-station orders require a new primary residence, but FHA treats military borrowers the same as civilians. Rental income from the home you are vacating can be counted toward your debt-to-income ratios only if you meet one of two standard conditions: you relocate more than 100 miles from that property and document a market-rate lease, or, if the new duty station is within 100 miles, you document at least 25 percent equity in the departing residence and provide a lease. When the new home is less than 100 miles away and equity is below 25 percent, FHA will not permit the rental income, so you must qualify while carrying both mortgage payments or consider alternatives such as refinancing the first home into a conventional loan or selling it.

FAQs

What is the impact of the FHA 100 Mile Rule on my ability to get multiple FHA loans?

You may count rental income from a departing FHA-financed home only when the new primary residence is more than 100 miles away. If the move is within 100 miles, rental income can’t be used unless you qualify on both mortgage payments (PITIs) or meet an exception (larger family, divorce/legal separation, non-occupant co-borrower).

Can I get conventional loans along with my FHA loan?

Yes, even after having an FHA loan, you can apply for a conventional loan if needed.

How does the rule impact my ability to get multiple loans?

The 100-Mile Rule decides whether you can use rent from your current FHA-financed home to qualify for another loan: only moves more than 100 miles away let that rental income count. If the new home is closer than 100 miles, the rent can’t be used unless you qualify for carrying both payments.

What happens if I want to buy a house closer than 100 miles but still need another loan?

In this case, applying for a conventional loan could be your best choice as it's not tied by the same rules as an FHA Loan.

Philip Bennett

(NMLS # 1098318)

Philip is the owner and Licensed Mortgage Broker at Bennett Capital Partners, LLC (NMLS #2046862). He earned a Bachelor’s degree in accounting and finance from Binghamton University and a Master's in finance from Nova Southeastern University. With more than two decades of industry leadership, Philip has successfully guided thousands of clients through complex mortgage transactions.

Learn more about Philip Bennett’s background on our Founder’s page. Whether you’re a first-time homebuyer or a seasoned real estate investor, we are here to help you reach your goals. Don’t wait - contact us today and let us help you find the right mortgage for your needs.