On March 26, 2025, the U.S. Department of Housing and Urban Development (HUD) announced a significant policy change affecting the eligibility criteria for Federal Housing Administration (FHA) insured loans. Effective May 25, 2025, FHA-backed mortgages will be restricted exclusively to U.S. citizens and lawful permanent residents. This move aligns with the Trump administration’s broader efforts to prioritize economic opportunities for U.S. citizens and ensure that federal benefits are reserved for individuals with stable, long-term residency status.
Key Details of the Policy Change:
- Affected Programs: The new guidance applies to all FHA loan programs, including Title I Property Improvement and Manufactured Home Loans, Title II loans, and Home Equity Conversion Mortgages (HECMs), which are FHA-backed reverse mortgages.
- Implementation Timeline: While lenders have the option to implement these changes immediately, compliance becomes mandatory for all FHA case numbers assigned on or after May 25, 2025.
Eligibility Criteria Under the New Policy:
- U.S. Citizens: Individuals holding U.S. citizenship remain eligible for FHA-insured financing, provided they meet standard FHA requirements
- Lawful Permanent Residents: Borrowers with lawful permanent resident status (Green Card holders) are eligible under the same terms as U.S. citizens. Lenders must document evidence of permanent residency status in the mortgage file.
- Citizens of Specific Freely Associated States: Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau may also qualify for FHA-insured financing, subject to the same requirements as U.S. citizens. Proof of such citizenship must be included in the mortgage documentation.
Implications for Non-Permanent Residents:
Prior to this policy update, non-permanent residents—such as individuals on work visas—could access FHA-insured mortgages if they met certain conditions, including using the property as a principal residence and possessing a valid Social Security number. The revised guidelines eliminate this eligibility, citing concerns about the uncertainty of these individuals’ ability to remain in the country and fulfill long-term financial obligations.
Documentation Requirements:
Lenders are now required to verify the residency status of all borrowers based on information provided in the mortgage application and supporting documentation. A Social Security card alone is deemed insufficient to prove immigration or work status. Acceptable documentation includes evidence issued by the U.S. Citizenship and Immigration Services (USCIS) confirming lawful permanent residency.
Rationale Behind the Policy Shift:
HUD officials have stated that this change is intended to ensure that FHA’s mortgage insurance programs are administered in alignment with the administration’s priorities, focusing on providing access to homeownership for U.S. citizens and lawful permanent residents. The policy reflects concerns that non-permanent residents’ uncertain immigration status could impact their ability to meet long-term mortgage obligations.
Industry Response:
The mortgage industry is adjusting to these new guidelines, with lenders reviewing their current pipelines to identify affected borrowers. Prospective homebuyers who are non-permanent residents are advised to explore alternative financing options or seek clarification from mortgage professionals on how this policy may impact their homeownership plans.
FHA Restricts Loan Eligibility to U.S. Citizens and Permanent Residents
