what is the 100 mile rule?
The "100-mile rule" is an FHA-specific threshold that governs two distinct scenarios: (1) when a borrower may carry a second FHA-insured loan without selling the first, and (2) when rental income from a vacated primary residence may be used to offset departing PITIA in DTI. Conventional and Non-QM programs use different — or no fixed — distance standards.
Context 1 — FHA Multiple Loan Exception (Relocation)
FHA will generally not insure more than one property as a principal residence for the same borrower. A relocation-based exception applies when both conditions are met: the move is employment-related AND the new home exceeds the mileage threshold.
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"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: relocating or has relocated for an employment-related reason; and establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower's current Principal Residence."
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Nations Direct mirrors this standard verbatim in their FHA product matrix: "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: relocating or has relocated for an employment-related reason; and establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower's current Principal Residence."
Context 2 — Departure Residence: Rental Income Offset (FHA)
The 100-mile threshold also controls whether rental income from a vacated primary can be used to offset that property's PITIA in the DTI calculation.
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Nations Direct (AXIS FHA Matrix): "If Rental Income is derived from the Property being vacated by the Borrower, the Borrower must be relocating to an area more than 100 miles from the Borrower's current Principal Residence.
- A lease agreement of at least one year's duration must be obtained after the Mortgage is closed and evidence of the payment of the security deposit or first month's rent.
- An appraisal report including 1007 & 216 supporting 25% equity and fair market rent in departing residence is required."
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Important context: If the borrower is NOT relocating more than 100 miles away, rental income from the vacated property cannot offset departing PITIA — both full PITIA obligations must be counted in DTI.
Second Home Distance Standards by Program
The 100-mile rule does not apply to second home classification. Distance standards vary by program:
| Program | Distance Requirement |
|---|---|
| FHA — second FHA loan (relocation) | > 100 miles + employment-related relocation |
| FHA (Nations Direct AXIS) — rental income from departing residence | > 100 miles + 25% equity + lease agreement |
| Fannie Mae — second home | No specific mileage; borrower must occupy for some portion of the year, exclusive control, one-unit, year-round suitable |
| Nations Direct NonQM — second home | At least 50 miles from primary residence |
| Mega Capital Silver Jumbo — second home | No specific mileage requirement; good judgment must prevail |
| JMAC Lending (Monterey Non-Conforming) / Mega Capital MVP — second home | Not in same market as primary; exceptions carved out for beach houses or commuter condos in a metro area |
- Note: Fannie Mae's second home rules rely on facts-and-circumstances review (occupancy intent, exclusive control, suitable for year-round use) rather than a hard mileage cutoff. Non-QM programs apply lender judgment with varying benchmarks.
