When Two People Buy a Home, Do They Both Use Up the FHA Loan?

The basic rule covering eligibility for a mortgage loan insured by the Federal Housing Administration is that joint owners of a home are both using their one FHA-backed mortgage that an individual can ordinarily have outstanding. Mitigating that limitation, the FHA lists several exceptions that allow a person who owns a home financed under an FHA program to apply for and be approved for a second FHA loan.

The purpose of the FHA mortgage program is to help provide loans for people to buy homes that they will live in. The FHA does not loan the money. It guarantees loans, which reduces risks for the lenders who make them. This source of financing is not intended for and cannot be used to finance homes purchased as investments. To prevent the use of FHA mortgages as investment financing, the base rule does not allow someone who owns or jointly owns a home financed by an FHA to get a second FHA-insured loan. A person's FHA mortgage eligibility is tied to the home he lives in, even if jointly owned.

While the FHA rules are designed so that the insured financing can only be used for a home that a single or couple will live in, you are not completely limited to having one loan at a time in your name. The guidelines allow a homeowner to get a second FHA loan if his family outgrows the current house or he moves out of the area. The first FHA financed home can then be kept as an investment property. There are also circumstances where one owner on a joint FHA loan can get another insured mortgage.

One of the exceptions to the rule of having only one FHA loan at a time applies to a jointly owned home when one of the owners moves out. In the event of a permanent separation such as a divorce, one owner can stay in the home with the FHA financing, and the person who leaves would be eligible to use FHA financing to purchase a new home to be his primary residence.

One of the joint owners of a home financed with an FHA loan could be the co-signer on another insured loan. The rules allow the owner of an FHA financed home to act as the co-signer for someone else who is buying a house for personal residential use, financing the home through the FHA. This rule allows parents, for example, to co-sign an FHA mortgage for an adult child, even if the parents live in a home financed with an FHA-backed loan.