Starting May 25, 2025, significant changes will be made to U.S. immigration policy, notably affecting who can qualify for FHA-backed mortgage loans. The new rules, declared this week by the Department of Housing and Urban Development (HUD), will restrict loan access to only U.S. citizens and lawful permanent residents. This decision excludes thousands of immigrants with temporary statuses, including those in immigration proceedings or using their ITIN to file taxes.
A Shift in Housing Policy: From Inclusivity to Exclusion
Since its inception in 1934, the FHA has played a pivotal role in making homeownership more accessible in the U.S., particularly for those with low incomes, imperfect credit histories, or insufficient funds for a substantial down payment. FHA loans are especially popular among first-time buyers due to their low down payments and lenient approval criteria.
However, this new directive, enforced by the Trump administration, ends the more inclusive policy adopted during Joe Biden's presidency, which allowed immigrants with non-permanent status, such as DACA recipients, to access these government-backed loans. The change was made official on March 26 with a memorandum signed by Deputy Assistant Secretary for Housing, Jeffrey D. Little, citing the administration's economic priorities.
Implications for Affected Groups
The removal of the "non-permanent resident" category from FHA's Title I and II Single Family Housing programs means thousands of legal immigrants, previously eligible under certain conditions, are now excluded. This includes:
- Individuals with temporary work visas.
- International students on F or J visas.
- Asylum and refugee status applicants awaiting approval.
- DACA beneficiaries.
- Immigrants using ITINs for taxes without an SSN.
Little noted that non-permanent residents face immigration laws that could impact their legal stay in the country, presenting challenges for the FHA, as fulfilling long-term financial obligations hinges on stable residency and employment.
The Government's Rationale: Protecting Taxpayers and Closing Gaps
This measure is part of a broader political and economic strategy by Trump to prioritize U.S. citizens' access to taxpayer-funded programs. HUD Secretary Scott Turner emphasized in National Review that undocumented immigrants would no longer receive HUD-backed mortgages, criticizing the previous administration for exploiting taxpayer resources.
"For those who follow the rules and work hard to buy a home, this is unacceptable. HUD will continue enforcing President Trump's executive order to end taxpayer subsidies for open borders and protect the American dream of homeownership," Turner stated.
While U.S. law explicitly prohibits undocumented immigrants from obtaining FHA loans, HUD acknowledged the lack of effective mechanisms to verify applicants' immigration status. In response, HUD has partnered with the Department of Homeland Security (DHS) to improve agency coordination and prevent undocumented immigrants from accessing federally funded housing or benefits.
Transitional Opportunities for Current Homebuyers
Despite stricter regulations, there remains a legal window for those already in the homebuying process. According to a Housing Department source in Washington, individuals who secure a "case number" before the policy change may qualify under existing rules, even if the deal closes later.
"Anyone considering home purchase should obtain a case number today, ensuring loan eligibility before the Trump administration's policy takes effect," the source indicated, noting that these case numbers remain valid for six months, granting crucial time for prospective buyers to finalize their applications under previous guidelines.
Why FHA Loans Are So Appealing
FHA loans have long been a vital option for working families, immigrants, and first-time buyers, offering:
- Flexible credit score requirements.
- Low down payments, sometimes less than 3%.
- Eligibility despite bankruptcy or financial issues.
- Inclusion of closing costs within the loan.
With the new rule, many who depended on these favorable conditions must now seek more restrictive and costly financing options in the private market.
Alternative Paths for the Excluded
Although FHA loans will no longer be available to non-permanent residents, alternative, albeit more limited and expensive, options exist. Since the Patriot Act of 2001, some banks have provided ITIN-based mortgages as an SSN substitute.
An Urban Institute report in early 2024 estimated that 5,000 to 6,000 ITIN-holder loans were issued in 2023, indicating that a segment of the financial system remains open to this group, albeit under less favorable conditions. The impact of this policy will be felt most acutely among Latino, Asian, and Caribbean communities, where many immigrants actively contribute to the economy, pay taxes, and engage in civic life, yet have not secured permanent residency.
For numerous individuals, the American dream of homeownership is now a more challenging aspiration.
Frequently Asked Questions about FHA Loan Restrictions for Immigrants
Who is affected by the new FHA loan regulations?
The new rules impact legal immigrants with temporary statuses, such as those with work visas, international students, asylum seekers, DACA recipients, and those using ITINs for tax purposes without an SSN.
What alternatives are available for those excluded from FHA loans?
Excluded individuals might consider ITIN-based mortgages offered by some banks, although they typically come with less favorable terms compared to FHA loans.
Can those already in the home buying process still qualify under old rules?
Yes, individuals who obtain a "case number" before the new rules take effect might qualify under the current regulations, even if closing occurs later.