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
📞 Give Us A Call Today 1-800-457-9057
Key Takeaways
✅ The FHA 100 Mile Rule prevents homeowners with an existing FHA loan from using rental income from their current residence to qualify for a new FHA-insured mortgage if the new home is located less than 100 miles away
✅ 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.
✅ There are exceptions to the FHA 100 Mile Rule that allow borrowers to hold multiple FHA loans, such as for active duty military personnel or when relocating for work over 100 miles away, but it’s important to meet all the necessary requirements.
Quick Navigation - Click the link below to jump to that section..
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.
This rule requires that your new home be at least 100 miles away from your current property if you intend to use rental income from the departing primary residence to qualify for the new loan.
If the new home is less than 100 miles away, you cannot use rental income from the current home, and qualifying for a second FHA loan becomes more difficult.
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, selling your current property may become necessary because the FHA 100 Mile Rule prevents you from using rental income from the first property to qualify for the new loan.
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
📞 Give Us A Call Today 1-800-457-9057
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. Because the FHA 100 Mile Rule prevents you from using rental income in these cases, selling the home allows you to free up your FHA eligibility for the new purchase.
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:
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 one. If the new home is closer, you may need to look at other loan options since the rental income won’t count.
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
📞 Give Us A Call Today 1-800-457-9057
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. However, if you’re relocating more than 100 miles away for work or other qualifying reasons, you may be able to secure multiple FHA loans under special conditions.
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 for a New Rental
If you already have an FHA loan and are considering buying another home, there are certain guidelines you need to meet. The property you are leaving must either be sold or rented, and you must be relocating at least 100 miles away to qualify for another FHA-insured mortgage.
In some cases, if you're a co-borrower on an existing FHA loan, you may still qualify for a new FHA loan under specific conditions.
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 while purchasing a second home, even if your first residence is rented out.
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?
The FHA 100 Mile Rule applies if you intend to use the rental income from the departing primary residence to qualify for the new loan. This rule allows a buyer to retain their FHA loan on their prior residence when they move to another area.
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?
Yes, there are exceptions to this guideline. Thanks to the rule's flexibility, borrowers may qualify for another FHA-insured mortgage on a new principal residence within 100 miles of their current residence if certain conditions are met, such as a change in employment or family size.
Can I obtain a new FHA-insured mortgage if I am in active duty status?
Yes, active duty military personnel can obtain a new FHA-insured mortgage under the 100 Mile Rule. This rule allows them to retain their FHA loan on their prior residence and purchase a new home with another FHA loan, even if their duty station is over 100 miles away.
Can I obtain a HomeReady loan under the FHA 100 Mile Rule?
The FHA 100 Mile Rule applies specifically to FHA-insured mortgages. If you are interested in a HomeReady loan, you would need to consult with your lender to determine eligibility and any applicable guidelines.
FAQs
What is the impact of the FHA 100 Mile Rule on my ability to get multiple FHA loans?
The FHA 100 Mile Rule affects your ability to get multiple FHA loans in a positive way. It allows you to retain your FHA loan on your prior residence and obtain another FHA-insured mortgage on a new principal residence, even if they are within 100 miles of each other.
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 rule impacts how far away your next home must be before rental income from your present home will help on your new loan application.
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
Philip is the owner and Licensed Mortgage Broker at Bennett Capital Partners, Bus. NMLS # 2046828. He earned his degree in Accounting and Finance from Binghamton University and holds a Master's Degree in Finance from NOVA Southeastern University. With more than 20 years of experience, Philip has been a leader in the mortgage industry. He has personally originated over $2 billion in residential and commercial mortgages.
Learn more about Philip Bennett's background and experience on our Founder's page. Whether you're a first-time homebuyer or a seasoned real estate investor, our team is here to help you achieve your real estate goals. Don't wait any longer, contact us today and let us help you find the right mortgage for your needs.
Discover helpful tips and tricks on mortgages by reading our blog posts
FHA 100% Financing Program In Florida To learn about the Zero down FHA loan program. Click here to read the full article
Florida FHA Loan Limits 2024 To see the comprehensive list of Florida FHA Loan Limits for every county in Florida. Click here to view the loan limits
FHA Florida Mortgage Rates See the current real-time FHA mortgage rates. Click here to see the live rates
