If you have an FHA mortgage or are using one to purchase a home, you are still allowed to obtain secondary financing. This second mortgage can be in the form of a line of credit (HELOC) or fixed rate mortgage. It can also be from any lender as long as it fits the criteria laid out below. Like the Fannie/Freddie conventional mortgages, there have become strict criteria for approval. Below are some of the general guidelines:

• Borrower’s income must be sufficient to qualify for the combined total of payments on both the FHA and non-FHA mortgages (ratio guidelines have tightened, so this might be harder than before)
• Payments on 2nd mortgage must be monthly, with all payments being substantially the same amount (in other words- you can’t pay at the end or once a year)
• Second mortgage may not have a balloon due sooner than in ten years (you cannot be required to pay it back before 10 years)

These second mortgage restrictions do not apply if mortgage is held by federal, state, or local governments for those of youthat received special offers from the government. This, government loans can have balloons, higher interest rate, pre payment penalties, and the like. So, really read the fine print. Most of all find out what your specific lender requirements are for having a second mortgage. Many first mortgage holders will not allow seconds or be very tight with qualifying. So, check before you do the work!