Earlier this year, the U.S. Department of Housing and Urban Development made non-permanent residents no longer eligible for Federal Housing Administration (FHA)-insured mortgages. Previously, non-permanent residents had been allowed to benefit from the program’s low down payments and flexible credit requirements.
The move impacted H-1B, L-1, and F-1 visa holders (including non-immigrant work, study or tourism visa holders), and those who haven’t yet obtained lawful permanent resident status (a green card). The HUD policy shift was announced in Mortgagee Letter 2025-09, and took effect May 25, 2025. The new rule eliminates eligibility for non-permanent residents across all FHA Title I (property improvement and manufactured home loans), Title II Single Family and Home Equity Conversion Mortgage (HECM) programs.
For brokers working with foreign nationals wanting to buy a home in the U.S., this can be a problem. But there are alternative financing methods that help solve this dilemma.
Changing rules
Previously, visa holders with valid Social Security Numbers and lawful U.S. residency could qualify if they met FHA’s credit and income standards. Now, only U.S. citizens, lawful permanent residents (green card holders), and citizens of the Federated States of Micronesia, Republic of the Marshall Islands, or Republic of Palau are eligible, effective for FHA case numbers assigned on or after the policy shift took effect.
The change stems from President Donald Trump’s February 19, 2025, executive order, “Ending Taxpayer Subsidization of Open Borders,” directing federal agencies to prioritize resources for citizens and permanent residents. HUD’s rationale highlights the uncertainties facing immigrants: “Non-permanent residents are subject to immigration laws that can affect their ability to remain legally in the country,” wrote Jeffrey D. Little, General Deputy Assistant Secretary for Housing, in the Mortgagee Letter. This could impact their ability to meet long-term mortgage obligations.
Also, in March, HUD and the Department of Homeland Security (DHS) signed the “American Housing Programs for American Citizens” Memorandum of Understanding, enabling data sharing to verify residency status. Lenders must now use U.S. Citizenship and Immigration Services (USCIS) documents. Social Security cards alone are insufficient.
Alternative financing options
FHA loans had been a popular choice for non-permanent residents due to their low 3.5% down payments and lenient credit requirements. Homeownership remains achievable through mortgage programs tailored for these visa holders. Non-qualified mortgage (non-QM) loans, offered by private lenders, are particularly suited for those with limited U.S. credit history, while conventional loans may be an option for those with established U.S. credit.
Features of some lenders’ non-QM options include:
- Flexible credit assessments: Borrowers can qualify using international credit reports from their home countries, bank reference letters or other proof of creditworthiness (e.g., rental payment history or utility bills). A U.S. credit score below 620 is acceptable if alternative documentation is provided.
- Eligibility requirements: Borrowers must provide proof of income, employment, and a debt-to-income (DTI) ratio below 43%. A minimum of two months of cash reserves is typically required to demonstrate financial stability. Unlike FHA loans, a two-year U.S. work history may not be mandatory.
- Loan terms: Non-QM lenders can offer up to 30-year fixed-rate mortgages, allowing manageable monthly payments. Down payments typically range from 20% to 30%, higher than FHA’s 3.5% but competitive for non-QM loans.
- Quick processing: Loans can close in as little as 30 days or sooner, depending on the lender and documentation provided
Clear path
While these programs are offered by select lenders, availability may be limited due to the complexity of underwriting non-traditional credit profiles. Interest rates are generally higher than FHA loans (e.g., 1-2% above conventional rates), and borrowers should expect to provide detailed documentation, such as international bank statements, visa status and proof of lawful residency.
One senior customer loan specialist at a lender that provides such non-QM loans says, “I understand FHA loans were an affordable choice, but this isn’t the end of the road for you as a non-permanent resident. Buying a home still makes sense, and there are mortgage programs available for non-permanent residents, helping them buy a home in the U.S. even with no/thin U.S. credit history.”
Such loans may have higher interest rates than FHA loans, but they still provide a clear path to homeownership. They also don’t require a U.S. credit history and documentation showing two years of work history, which are necessary for FHA loans.
“Non-permanent residents with lawful residency and valid Social Security Numbers may qualify for conventional loans backed by Fannie Mae or Freddie Mac, which remain available despite the FHA policy change.”
Conventional Loans
Non-permanent residents with lawful residency and valid Social Security Numbers may qualify for conventional loans backed by Fannie Mae or Freddie Mac, which remain available despite the FHA policy change. However, these loans require an established U.S. credit history, making them less accessible for newcomers with thin or no U.S. credit. Key considerations include:
- Eligibility: Borrowers must provide proof of legal presence, such as a valid work visa (e.g., H-1B, L-1, F-1) or Employment Authorization Document (EAD). Lenders often require the visa to be valid for at least three years or likely to be renewed. A Social Security Number is required.
- Credit and Income: A U.S. credit score of 620 or higher is required, based on domestic credit reports (e.g., Experian, Equifax, TransUnion). For borrowers without a U.S. credit score, some lenders may accept non-traditional U.S.-based credit sources, such as 12 months of on-time rent or utility payments. However, international credit history is not permitted. A debt-to-income (DTI) ratio below 36%-45% and stable income (verified via pay stubs or tax returns) are essential.
- Down Payment: Typically, lenders require 5% to 20% down payments, though some lenders offer 3% down for primary residences for borrowers with strong credit profiles. Private mortgage insurance (PMI) is required for down payments below 20%.
- Lender Variability: Not all lenders offer conventional loans to non- permanent residents due to perceived risks and complex underwriting. Look for specialized lenders with expertise in handling foreign national mortgages.
Conventional solution
Conventional loans offer competitive interest rates for qualified borrowers but require more documentation and stricter credit standards than FHA loans. Non-permanent residents with limited U.S. credit history may find non-QM loans more suitable, due to their flexibility with international credit.
Since the FHA’s new rule took effect, you can no longer apply for an FHA loan as a non-permanent resident. But brokers representing foreign nationals don’t need to worry. Homeownership is still within reach. Brokers need to contact lenders that specialize in foreign national mortgages to find a loan tailored to their client’s visa status and financial profile.
