HUD revises residency requirements for FHA loans
The Federal Housing Administration (FHA) has announced a key policy update that will affect borrower eligibility for FHA-insured mortgages. Released on March 26, 2025, in Mortgagee Letter 2025-09, this update brings significant changes to the residency requirements for FHA Title II Single Family forward and reverse mortgage programs.
Key Changes
❌ Non-Permanent Resident Eligibility Removed Starting May 25, 2025, non-permanent residents, including those with legal work authorization, will no longer qualify for FHA loans, including:
FHA Title II forward mortgages
Home Equity Conversion Mortgages (HECMs)
This affects all purchase, refinance, and reverse mortgage transactions.
✅ Updated Guidelines for Permanent Residents Lawful permanent residents (green card holders) remain eligible but must meet the same requirements as U.S. citizens. They’ll need to provide:
Proof of permanent resident status from USCIS
Confirmation of permanent resident status on the Uniform Residential Loan Application (URLA)
Exceptions for Compact of Free Association Citizens Citizens from the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau remain eligible under specific agreements and are treated as U.S. citizens for FHA eligibility.
Effective Date
These changes apply to case numbers assigned on or after May 25, 2025. Mortgagees must comply by this date, though they can implement the update immediately.
Why the Change?
The update aligns with federal priorities to ensure that loans are only granted to borrowers with secure, verifiable immigration status, reducing financial risk.
Impact on Loan Processing
Documentation will need to include official USCIS records, such as:
A valid green card (I-551)
Evidence of permanent resident status from DHS
For reverse mortgages (HECM), the same documentation applies.
Streamline Refinances
Non-credit qualifying streamline refinances remain available for borrowers who stay on the original FHA loan, but eligibility is still subject to the updated residency requirements.
What This Means for You
U.S. Citizens and Lawful Permanent Residents: No change, but ensure proper documentation.
Non-Permanent Residents: Will no longer qualify for FHA-insured mortgages after May 25, 2025.
Mixed-Status Households: If one borrower is a non-permanent resident, the entire application may be ineligible.
Need Help?
If these changes affect your eligibility, we can help you explore other loan options like conventional or non-QM programs. At Innovative Mortgage Brokers, we’re committed to finding the best solution for your needs and guiding you toward homeownership or refinancing with confidence.
Let’s navigate these changes together and get you closer to your homeownership goals.
