There are many reasons you would need a second FHA loan. Maybe you got a new job and relocated to a new city, maybe you’re looking for a fresh start after a divorce, or maybe you’re building your finances from the ground up after filing for bankruptcy. Since FHA loans are supposed to be granted only once per person, you might be worried you won’t be eligible for another loan. Thankfully, you can definitely find a way around this restriction.
Gauging Your Eligibility for a Second FHA Loan
If you’re a low- or moderate-income homeowner low on cash, the government established the Federal Housing Administration (FHA) loan program to assist your financial needs. This can also help you if you don’t have the best credit history.
Whatever the situation, the FHA loan provides a way for those who might otherwise be turned down by banks to become homeowners. Although FHA guidelines state that an FHA loan can only be used to finance a primary home, there are ways to get around this restriction and utilize an FHA loan to finance a second home.
In the following paragraphs, you will find out more about obtaining another FHA home loan, the roadblocks you need to pass if you’re ineligible, and the possible loopholes to overcome your ineligibility.
Getting a Second FHA Loan
Relocation is one of the strongest claims you can use to get a second FHA home loan. You may be qualified for a second mortgage if you are relocating a sufficient distance from your previous residence—for instance, if you’re moving from Houston to Chicago.
You also have a strong case for a second FHA loan if you’re leaving a co-owned house. This is commonly utilized in divorces where one of the spouses relocates and purchases a new home.
Finally, if you co-borrow a loan with a family member who also owns a primary house, then you can have two FHA loans simultaneously.
What Is the CAIVRS System?
If you’re an applicant for a second FHA loan, there’s a screening process—a credit check—you have to take before you can be approved for a loan. It’s the Credit Alert Verification Reporting System (CAIVRS) method, and it’s used by most lenders to pre-screen candidates. CAIVRS is a federal database that tracks those who owe money to the government. The following departments have delinquency records on a CAIVRS report:
- The Department of Veterans Affairs
- The Department of Housing and Urban Development
- The Department of Agriculture
- The Federal Deposit of Insurance Corporation
- The Department of Education
- The Department of Justice
- The Small Business Administration
CAIVRS is widely utilized, having approximately 61,000 user IDs, meaning any violations or offenses to any of the departments above could make it hard to get approval for a second FHA loan. Unless you have an approved repayment plan with the federal agency involved, your chances are generally slim. However, there’s still a way to go about this obstacle.
Exemptions to a CAIVRS Hit
Thankfully, even if you have a hit on the CAIVRS, you can still be eligible for a second FHA loan under three possible exceptions. The first is divorce. You may still qualify if your former spouse was awarded the property, assumed payment obligation, and then defaulted after the divorce was finalized.
Then there’s bankruptcy. If the property falls under a bankruptcy petition and the circumstances surrounding the filing can be demonstrated to be beyond your control, then you can retain your eligibility.
Finally, if you sold a house or property to a buyer who failed on an assumed payment, you can still get financing because your loan eligibility won’t be affected.
It’s common for applicants to appear on a CAIVRS screening by mistake. However, this is a simple problem to rectify. Contact your lender to find out which agency has listed you, and then supply your lender with the necessary proof demonstrating current payments. They will be able to remove your CAIVRS record with the right documents.
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