First Homes With FHA Loans: Buy Bigger or Smaller?

February 7, 2019

If you are a first-time home buyer looking to purchase a first home with an FHA home loan, there is one dilemma that some borrowers face. Buy a larger first home that you can grow into, or a smaller first home that you will sell at some point in order to move into a bigger property later.

The question isn’t just about floor plans, house prices in your housing market, or whether it makes financial sense to apply for a home loan to buy a property you know you may grow out of. There’s another area of concern for some FHA borrowers who have never purchased a home before.

Is It Possible to Sell the Starter Home You Buy With an FHA Mortgage and Buy Another Home With an FHA Loan?

There is a common misconception about FHA mortgage loans that involves whether a borrower is eligible to apply for an FHA mortgage if they are not a first-time home buyer.

Some think that FHA mortgages are only for first homes. Some think you cannot apply for another FHA loan to buy another house because they mistakenly believe that the FHA program is only for those purchasing a new home for the first time.

What’s the reality?

The truth is, no financially qualified borrower is restricted from applying for a second FHA home loan. This is NOT the same as using a second FHA mortgage to buy a second property while maintaining the original home.

FHA loan rules are designed to prevent this except under certain conditions such as a change in family size or a job relocation that takes the borrower outside a certain distance. But in all cases, FHA home loans require occupancy, so even if you are purchasing another property using an FHA mortgage, you would be required to occupy that home as the primary residence.

FHA Home Loans Are Permitted for Borrower’s Buying Another Home

The first-time home buyer wondering if they would be allowed to use the FHA loan program once more after purchasing a first home does not need to worry; FHA loans are possible for repeat borrowers.

If you plan to buy a smaller property with the intention of selling it later and buying a larger home, you should definitely consider an FHA mortgage in your plans. The low down payment requirements and more flexible FICO score minimums apply to all who financially qualify and NOT just first-time home buyers and house hunters.

Talk to a participating lender about your FHA home loan options and be sure to ask about refinance loans in case you decide to keep the property after all and want to make upgrades or improvements at a later date.

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