"In March, the Federal Housing Administration (FHA) issued new guidance limiting loan eligibility to U.S. citizens and permanent residents, aligning with President Donald Trump's broader policy agenda. The FHA cited immigration-related uncertainty as a key factor, saying non-permanent residents face potential legal and residency risks that could affect loan repayment. The ban has pushed LOs to convert clients to conventional loans, which typically require higher credit scores."
"The FHA program traditionally serves first-time homebuyers, allowing down payments as low as 3.5% and accepting credit scores down to the 500 range (with a 580 minimum for the lowest down payment). It also offers more flexible debt-to-income ratios and competitive interest rates. At least 70% of my clients were getting FHA loans, Galan said. Now, we have to convert them to conventional loans and help them get higher credit scores."
"Technically, conventional loans can be financed with a 620 credit score, however, the rate and PMI are atrocious. That means a client that might be able to afford a $200,000 home might only be able to qualify for $150,000. We have to work to get them in a higher credit tier. Lenders and LOs have also reported a decline in ITIN (Individual Taxpayer Identification Number) loans, a type of non-QM product often held by private investors."
The Federal Housing Administration now limits certain government-backed loan eligibility to U.S. citizens and permanent residents due to immigration-related uncertainty and potential legal or residency risks that could affect repayment. The restriction has forced loan officers and lenders to shift many borrowers from FHA products to conventional mortgages, which require higher credit scores and often carry worse rates and private mortgage insurance, reducing borrower purchasing power. FHA historically enabled low down payments and lower credit thresholds for first-time buyers. Demand for ITIN and foreign-national lending has declined as lenders monitor visa status and work to raise clients into higher credit tiers.
Read at www.housingwire.com
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