If you’re a non-permanent resident dreaming of owning a home, or if you’re considering refinancing your current FHA loan, big changes are coming your way. As of May 25th, the Federal Housing Administration (FHA) will stop insuring loans for non-permanent residents. This shift, aligned with prior Trump-era immigration policies, could drastically alter your home financing options—unless you act now.
In this article, we’ll break down what’s happening, why it’s changing, and most importantly—what you can do to stay on track with your homeownership goals.
What’s Changing With FHA Loans?
Starting May 25th, non-permanent residents will no longer be eligible for FHA loans. While you can still close on an FHA loan after that date, your loan must be under contract and have an FHA case number assigned before May 25th to qualify under the current guidelines.
This is not a permanent ban on all loans for non-permanent residents—but it does significantly reduce accessible options, especially for those who rely on FHA’s flexible credit and income requirements.
Why Is the FHA Making This Change?
The FHA insures home loans through the U.S. government. Because of this backing, it’s seen as a federal benefit. With concerns around the risk of loan default tied to deportation, the FHA is tightening its eligibility guidelines.
This change reflects a more restrictive approach to immigration-related benefits and is seen as a risk management move by the federal government.
Who Will Be Most Affected?
Approximately 10 million non-permanent residents in the U.S. may feel the impact of this change. FHA loans are often the go-to option for:
Buyers with credit scores below 700
Borrowers with higher debt-to-income ratios
First-time homebuyers using down payment assistance programs (DPAs)
With FHA loans off the table, many buyers will need to shift to conventional loan options, which often have stricter qualification criteria.
What Are the Alternatives to FHA Loans?
Good news: FHA loans aren’t the only game in town.
✅ Conventional Loans
Fannie Mae and Freddie Mac have not (yet) followed the FHA’s lead on non-permanent resident eligibility. This means:
First-time homebuyers may qualify with as little as 3% down—if they have a credit score of 700+
There are conventional DPA programs still available, like Colorado’s CHFA
✅ Non-Agency Lenders
Some non-agency lenders (private institutions) are not making any changes. These lenders may still offer financing for non-permanent residents, but expect:
Higher down payments (typically 10–15% minimum)
Possibly higher interest rates
These lenders can be a solid option if you don’t meet conventional guidelines but need to move quickly.
What Should You Do Next?
🏡 If You’re Buying a Home:
Get pre-approved ASAP if you’re a non-permanent resident planning to use an FHA loan.
You must be under contract and have a case number issued before May 25th to qualify.
Act now to lock in lower down payment options and access to FHA’s more lenient requirements.
🔄 If You’re Refinancing:
Already have an FHA loan but credit below 700?
Now may be the time to refinance, before you’re no longer eligible.
Reach out to your loan officer to discuss whether this is the right move.
Credit Score Is Key to Lower Down Payments
If you’re a non-permanent resident and your credit score is close to 700, now is the time to focus on boosting it.
With a score in the 700s, you can access 3% down options through conventional loans.
Improving your credit could mean thousands saved in upfront costs.
Don’t Panic—Plan Instead
This policy change is significant, but it doesn’t have to derail your homeownership journey. What matters most is planning ahead and knowing your options.
Key Takeaways:
FHA loans will not be available to non-permanent residents after May 25th
You must be under contract with an assigned case number by that date to qualify
Alternatives include conventional loans and private lenders
Boost your credit score to access better options
Refinance now if you already have an FHA loan and won’t qualify for other options soon
Final Thoughts
“There’s a lot of fear out there. This isn’t the end of the road,” says Nathan Jennison, Managing Broker and Owner of Mortgage Architects. “It’s about making intelligent, informed plans so you can still achieve your homeownership goals.”
Whether you’re buying or refinancing, time is of the essence. Connect with your real estate agent and mortgage professional today to map out your strategy.
Frequently Asked Questions: FHA Loan Changes for Non-Permanent Residents
1. What exactly is changing with FHA loans?
As of May 25, 2025, non-permanent residents will no longer be eligible for FHA-insured loans. This includes new home purchases and refinances. To qualify under current guidelines, borrowers must have an FHA case number assigned before May 25th.
2. Can I still close on my FHA loan after May 25th?
Yes—as long as your loan is under contract and your FHA case number has been assigned prior to May 25th, you can still proceed with closing after that date.
3. Why is this policy change happening?
The FHA is aligning with federal immigration policies, aiming to reduce risk associated with loan defaults due to potential deportations. Since FHA loans are backed by the U.S. government, they are viewed as a form of public benefit.
4. Are conventional loans still available for non-permanent residents?
Yes—for now. Fannie Mae and Freddie Mac have not announced similar restrictions, so conventional loans remain an option, especially for borrowers with credit scores of 700 or higher.
5. What other loan options do I have if I’m a non-permanent resident?
Beyond FHA and conventional loans, private or non-agency lenders still offer mortgage products. These typically require:
10–15% down payment
Higher credit scores
Possibly higher interest rates
6. I already have an FHA loan—should I refinance now?
If you are a non-permanent resident with an FHA loan and don’t anticipate your credit score reaching 700+, it may be wise to refinance now before the policy change takes effect.
7. What if I need down payment assistance?
Most down payment assistance (DPA) programs are tied to FHA loans, but some states (like Colorado’s CHFA) offer conventional-based DPAs that remain available.
8. How do I boost my credit to qualify for a conventional loan?
To reach the 700+ credit score range:
Pay down high credit card balances
Make on-time payments
Avoid opening new credit lines
Work with a credit advisor if needed
9. I’m not sure which loan type I qualify for—what should I do?
Start by getting pre-approved. A mortgage professional can assess your unique situation and help you identify the best loan type for your goals.
10. Who should I contact to get started before May 25th?
Contact Nathan Jennison and the team at Mortgage Architects as soon as possible. Timing is critical to preserve your FHA eligibility.
Owning a home is a dream for many, but what happens when you’re juggling both a mortgage and student loan debt? Fear not, because you’re not alone! With the right strategies and knowledge, you can successfully manage both mortgage and student loan payments and achieve the homeownership dream. In this comprehensive guide, we’ll explore mortgage products, income-driven repayment plans, and various mortgage programs designed to cater to borrowers with student loan debt. Let’s dive in and conquer this financial challenge together!
Key Takeaways
Understand how mortgage products treat student loan debt to get the best one for your finances.
Use income-driven repayment plans to lower monthly payments and increase purchasing power.
Create a budget, prioritize debt payments & explore refinancing options to manage both mortgages & student loans effectively.
Understanding How Mortgage Products Treat Student Loan Debt
Different mortgage products treat student loan debt in various ways, which can greatly impact your ability to qualify for a mortgage loan. Lenders typically use your debt-to-income (DTI) ratio to determine your eligibility for a home loan. This ratio compares your monthly debt payments, including your student loan payments, to your gross monthly income.
For example, Fannie Mae counts 1% of the principal balance when calculating your DTI if the student loan is in deferment or forbearance. On the other hand, Freddie Mac and FHA use 0.5% of your student loan principal balance in their calculation when your student loans are not in repayment. A clear grasp on how varying mortgage products handle your student loan debt empowers you to select the most beneficial mortgage option tailored to your financial circumstances.
Using Income-Driven Repayment Plans
Income-driven repayment plans can be a game-changer for borrowers with federal student loans. These plans adjust your monthly payment based on your income and family size, making your federal student loan payments more manageable. This can help you qualify for a mortgage by lowering your monthly student loan payments, ultimately improving your debt-to-income ratio.
We will examine the ways in which income-driven repayment plans can aid in qualifying for a mortgage, reducing student loan payments, and potentially heightening your purchasing power.
Getting Qualified for a Mortgage with Student Loan Debt
Begin your journey to mortgage qualification with student loan debt by following these steps:
Familiarize yourself with the mortgage products for which you’re eligible and their respective approaches to student loans in DTI computations.
Consider adjusting your student loan repayment plan to minimize your DTI ratio.
Request lenders to use your actual student loan payment, rather than the principal balance, in their calculations if your payments are lower than the calculated amount.
This strategy could help you qualify for a higher mortgage amount.
With the right approach and a clear understanding of mortgage products, you can improve your chances of getting a mortgage while managing your student loan debt.
Lowering your Student Loan Payments with Income-Driven Repayment Plans
Lowering your student loan payments with income-driven repayment plans can result in significant monthly savings and improve your debt-to-income ratio. Modifying your monthly payment according to your income and family size can alleviate the pressure of your federal student loan debt.
This can free up more money for other financial goals, such as saving for a down payment on a home or investing in your future.
Increasing your Purchasing Power by Using Income-Driven Repayment Plans
Using income-driven repayment plans can increase your purchasing power by allowing you to qualify for mortgage products based on your income, family size, and employer type. Some loans that allow for federal student loan income-driven repayment plans to count towards reduced DTI include:
Freddie loans
Fannie loans
FHA loans
VA loans
Participating in these programs and cutting down your student loan payments allows you to allocate more of your monthly income to an equity-building mortgage, enhancing your purchasing power in the real estate market.
Understanding the Relationship Between Mortgage and Student Loan Debt
Understanding the relationship between mortgage and student loan debt is essential for successful homeownership. Balancing both types of debt requires you to prioritize your financial goals and make informed decisions that align with your unique circumstances.
The upcoming sections will provide a deeper understanding of:
The influence of student loan debt on mortgage approvals
The significance of credit scores in deciding mortgage rates
The Impact of Student Loan Debt on Mortgage Approvals
Student loan debt can impact mortgage approvals by affecting your debt-to-income ratio and limiting the amount you can borrow. Lenders often use the actual monthly payment you make towards your student loans in their calculations. A significant monthly student loan payment can limit your ability to borrow for a mortgage because it causes your backend debt-to-income ratio to be too high.
However, there are legal methods to change your student loan payment in a way that benefits your home-buying goals, such as entering an income-driven repayment plan.
How Credit Scores Affect Mortgage Rates
Credit scores play a significant role in determining mortgage rates. A higher credit score can lead to lower interest rates, potentially saving you thousands of dollars over the life of your mortgage.
Managing your student loan debt responsibly can help improve your credit score, as payment history accounts for a significant portion of your overall credit score. By making timely student loan payments and maintaining a healthy mix of credit accounts, you can improve your credit score and secure better mortgage rates.
Debt-to-Income Ratio Explained
The debt-to-income ratio is a critical factor in mortgage approvals, as it measures your ability to manage monthly debt payments relative to your gross monthly income. Lenders typically prefer a maximum DTI of 43%, although some may accept up to 50%.
Managing your student loan debt, also known as student debt, can help keep your DTI ratio in check, ensuring that you can comfortably afford your mortgage payments and other financial obligations.
Student Loan Repayment Post-CARES Act
The end of the student loan payment pause under the CARES Act may require borrowers to explore repayment options, forgiveness programs, and other forms of relief. As payments resume, it’s crucial for borrowers to assess their financial situation and consider their options for managing both mortgage and student loan obligations.
The administration has introduced the SAVE Plan, which includes the following measures:
Decreasing the payment required on an income-driven payment plan
Increasing the income cap
Providing a “grace period” for borrowers unable to make payments when they become due
By staying informed and proactive, borrowers can navigate the post-CARES Act landscape with confidence.
Strategies for Balancing Mortgage and Student Loan Repayments
Balancing mortgage and student loan repayments can be challenging, but it’s not impossible with the right strategies in place. In the following sections, we’ll discuss:
The importance of prioritizing debt payments
Exploring refinancing options for student loans and mortgages
Creating a budget to effectively manage your debt obligations
Prioritizing Debt Payments
Prioritizing debt payments is a crucial strategy for managing your mortgage and student loan obligations more effectively. Concentrating on debts with the highest interest rates or the smallest balances enables you to:
Save on interest payments
Expedite your debt clearance
Free up more of your income to put towards other financial goals, such as saving for a down payment on a home or investing in your future.
Refinancing Options for Student Loans and Mortgages
Refinancing options for student loans and mortgages can help borrowers lower their interest rates and monthly payments. This can make it easier to manage both types of debt and free up more money for other financial goals. However, it’s essential to weigh the pros and cons of refinancing, as it could result in higher interest rates, loss of federal benefits, or reduced protections for borrowers.
Always consider your unique financial situation and goals before deciding to refinance.
Creating a Budget to Manage Debts
Creating a budget is essential for managing debts and ensuring financial stability while juggling mortgage and student loan payments. Monitoring your expenses, pinpointing potential savings areas, and modifying your spending habits allows for more efficient debt management and prioritization of your financial objectives.
Consider using budgeting tools and apps to help you stay organized and accountable as you work towards balancing your mortgage and student loan payments.
Mortgage Programs for Borrowers with Student Loan Debt
Various mortgage lenders offer programs that cater to borrowers with student loan debt, including:
FHA loans
VA loans
USDA loans
Down payment assistance programs
These programs can provide flexible options and additional support to help borrowers manage their mortgage and student loan obligations.
In the following sections, we’ll explore the benefits of each program and how they can assist borrowers with student loan debt in achieving their homeownership goals.
FHA Loans for Borrowers with Student Loans
An FHA loan, backed by the Federal Housing Administration, offers flexible options for borrowers with student loans, including lower down payments and more lenient credit requirements. Understanding how FHA loans treat student loan debt in their DTI calculations can help you determine if this mortgage option is suitable for your financial situation.
Collaborating with an FHA-approved lender allows you to leverage the benefits of FHA loans and smoothly journey towards homeownership despite student loan debt.
VA and USDA Loans for Borrowers with Student Loans
VA and USDA loans provide additional mortgage options for borrowers with student loan debt. VA loans, backed by the Department of Veterans Affairs, are available to eligible veterans and active-duty military members. USDA loans, backed by the United States Department of Agriculture, cater to borrowers in rural areas. Both loan programs often have no down payment requirements, making homeownership more accessible for those with student loan debt.
By understanding the eligibility criteria and benefits of VA and USDA loans, borrowers can explore these mortgage options as a viable path to homeownership.
Down Payment Assistance Programs
Down payment assistance programs can help borrowers with student loan debt afford the upfront costs of homeownership. These programs provide grants, low-interest loans, or tax credits to reduce the amount needed for a down payment.
Collaborating with a lender to explore potential down payment assistance programs empowers borrowers with student loan debt to realize their homeownership dreams without the financial burden of a hefty initial payment.
Preparing for Homeownership with Student Loan Debt
Preparing for homeownership with student loan debt involves building an emergency fund, improving credit scores, and assessing home affordability. In the following sections, we’ll discuss the importance of each step in ensuring that you can manage your mortgage and student loan obligations without financial strain.
Building an Emergency Fund
Building an emergency fund is crucial for managing unexpected expenses while juggling mortgage and student loan payments. Experts typically recommend:
Having three to six months’ worth of living expenses in an emergency fund
Establishing realistic savings goals
Making consistent deposits
Automating your savings
This enables the creation of a financial safety net, safeguarding you and your family from unexpected financial hurdles.
Improving Credit Scores
Improving credit scores can lead to better mortgage rates and terms, making homeownership more affordable for borrowers with student loan debt. Responsible management of your student loan debt and maintaining a balanced mix of credit accounts can bolster your credit score and result in more favorable mortgage rates.
Make timely student loan payments, avoid maxing out your credit cards, and regularly monitor your credit report for inaccuracies to ensure your credit score remains in good standing.
Assessing Home Affordability
Assessing home affordability is essential for ensuring that you can manage your mortgage and student loan obligations without financial strain. When determining home affordability, take into account factors like:
Your income
Your credit score
Your debt-to-income ratio
Your savings for down payments
Use online tools and calculators to estimate your monthly mortgage payment and explore different mortgage programs to find the best fit for your financial situation.
Summary
In conclusion, managing mortgage and student loan debt may seem daunting, but with the right strategies and knowledge, homeownership is within reach. By understanding how different mortgage products treat student loan debt, utilizing income-driven repayment plans, and exploring various mortgage programs, you can navigate the path to homeownership with confidence. Don’t let student loan debt hold you back from achieving your dream of owning a home. With careful planning, prioritizing debt payments, and assessing home affordability, you can make homeownership a reality even with student loan debt.
Frequently Asked Questions
Does having student loans affect getting a mortgage?
Having student loans can make it harder to qualify for a mortgage, since lenders consider your debt-to-income ratio as part of their evaluation. To improve your chances of qualifying, pay off other debts and make sure your student loan payments are up to date.
Can I put my student loans into my mortgage?
Yes, you can put your student loans into your mortgage if you have the right loan and enough equity in your home.
Can I use my student loans to pay mortgage?
Unfortunately, you cannot use your student loans to pay for your mortgage as this is not an approved use of such loans. However, if you owned a home before taking on the cost of college tuition, you may be eligible.
Can you be denied a mortgage because of student loans?
Having student loan debt can make getting a mortgage more difficult, as lenders consider your current debt, credit score, and payment history. However, making student loan payments on time can actually help your credit scores, which makes it possible to obtain a mortgage with student loan debt.
What are some mortgage programs available for borrowers with student loan debt?
Borrowers with student loan debt can take advantage of mortgage programs such as FHA, VA, USDA loans, and down payment assistance programs.
Buying a home can be a daunting experience, especially when it comes to securing a loan. But with FHA home loans, you can breathe a sigh of relief.
These loans are backed by the government, which means the lending requirements are more relaxed compared to traditional loans. And with a low down payment of only 3.5%, homeownership is now within reach.
At The Mortgage Architects, we specialize in providing FHA loans. So, even if your credit score isn’t perfect, don’t worry! You may still be eligible for a higher loan amount with our relaxed minimum credit score and requirements.
