Posted by Jackie (NJ) on October 27, 1998 at 20:20:00:
"To prevent circumvention of the restrictions on FHA-insured mortgages to investors, we generally will not insure more than one mortgage for any borrower. An individual or couple owning a home covered by a mortgage insured by FHA that will be kept may not purchase another principal residence with FHA mortgage insurance except under the situations described below.
A. Relocation
B. Increase in Family size. If the number of dependents has increased to the point where the present house no longer meets the family’s needs, teh borrower may be permitted to obtain another home with a FHA-insured mortgage. The borrower must provide satisfactory evidence of the increase in dependents and how the property no longer meets the family’s needs, and must also pay down the outstanding mortgage balance on the present property to a 75 percent or less LTV ratio exclusive of any financed MIP. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real eastate brokers, etc., are not acceptable.
C. Vacating a Jointly-Owned Property. If the borrower is vacating a residence that will remain occupied by a co-mortgagor, the individual vacating the property is permitted to obtain another FHA-insured mortgage. Acceptable situations include those following a divorce where the vacating ex-spouse will be purchasing a new home, or where one of the co-mortgagors will vacate the existing property and is getting married.
D. Non-occupying co-borrower. A borrower that will be a non-occupying co-borrower on property being purchased with a FHA-insured mortgage as a principal residence by other family members may have a joint interest in the property as well as his or her principal residence that is covered by a FHA-insured mortgage.
In no event may the exceptins described above be used to assist investors in acquiring rental properties through purportedly purchasing “principal residences” and, thus, circumventing FHA’s ban on loans to private investors."
Taken from http://www.hudclips.org
Mortgage Credit Analysis for Mortgage Insurance on One- to Four- Family