FHA Discussion

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FHA 100 Mile Rule Exceptions

FHA 100 Mile Rule Exceptions

FHA guidelines require FHA loans to be used for primary residences only and borrowers may not have more than one FHA loan at the same time.

Meanwhile, there are many homeowners who have outgrown their current home and wish to purchase a new home without selling their current home. In this situation, if your current home is financed with an FHA loan and you wish to also purchase your new home with an FHA loan, the FHA guidelines require the new home to be at least 100 miles away from your current home. This is called the FHA 100 mile rule.

There are FHA 100 mile rule exceptions which will allow you to have two FHA loans at the same time without having to move 100 miles away.

FHA 100 Mile Rule Exceptions

There are 4 exceptions to the FHA 100 mile rule and they are as follows.

  1. Relocation
  2. Increase in family size
  3. Vacating a joint owned property
  4. Non-occupying co-borrower

These exceptions and excerpts come directly from HUDs guidelines for FHA loans.

1. Relocation

This excerpt is directly from HUDs guidelines for FHA loans.

“A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:

    1. relocating or has relocated for an employment-related reason; and
    2. establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

If the borrower moves back to the original area, the borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence, provided the relocation meets the two requirements above.” – handbook 4000.1

2. Increase in Family Size

A borrower may be eligible to purchase or refinance another house with an FHA loan if the borrower provides documentation that:

    1. the Borrower has had an increase in family size or dependents and the home no longer meets the family needs and requirements; and ….
    2. the loan to value ratio on the current home is equal to or less than 75% or is paid down to 75% of the current appraised value. This is based on the outstanding mortgage balance as compared to a current residential appraisal.

3. Vacating a Jointly Owned Property

A Borrower may be eligible for another FHA insured mortgage if the borrower is vacating (with no intent to return) the current primary residence which will remain occupied by an existing co-borrower. An example of this would be if you got divorced and remained on the mortgage of the home where your ex-spouse now lives.

4. Non-Occupying Co-Borrower

A non-occupying co-borrower on an existing FHA loan (a co-signer of that loan) may qualify for a new FHA insured mortgage on a new home to be their own primary residence. In this case, the borrower would still be legally responsible for paying both mortgages.

The FHA rules regarding the number of FHA loans someone is permitted to have can be circumvented to purchase properties that can be used as investment properties. Read FHA loans for investment properties to learn more about how to do this.

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