FHA residency requirements: How to become eligible for a loan

Can foreign nationals purchase homes in the United States?

Immigrants standing in front of US flagFHA loans are available for any lawful permanent residents who meet the specific FHA requirements. It does not matter whether you are a permanent or non-permanent resident alien. Even a temporary employee is eligible to for an FHA loan.

What is the difference between a permanent and a non-permanent resident alien?

The only difference is that permanent residents are not required to meet all requirements that non-permanent residents must meet.

For example, if you are a non permanent resident alien, you will only be eligible for a loan if the property you intend on purchasing using the FHA loan will function as your primary residence.

You must also possess a BCIS Employment Authorization Document, be eligible to work in the United States, and have a valid social security number.

According to FHA regulations, if the permit for temporary resident status expires within one year and there is a history of renewals, the lender may anticipate that the authorization will be renewed.

If there have been no previous renewals, the lender must evaluate the likelihood of renewal based on BCIS data."

Two Types of United States Residency

There are two types of U.S. residency: permanent and non-permanent. A permanent resident is a person who has been in the U.S. for at least three years and has a green card.

Permanent Resident with a Green Card

It is generally accepted that a person is considered to be a permanent resident alien in the United States if they are in possession of both a social security number and a green card.

If a person is a permanent resident alien and wants to receive a mortgage by applying for an FHA loan, they will be required to provide the lender with a valid green card, a Social Security card, and Form I-551.

These items must be in the person's possession at the time of the application for the mortgage. In addition to these papers, the individual will be needed to present evidence that demonstrates they meet the criteria necessary to get the loan.

In order to successfully apply for a mortgage, you will need to complete this step. The procedure that must be followed by a resident alien is, for the most part, quite similar to the one that must be followed by a citizen; however, the most significant distinction is that the resident alien will be needed to provide their documentation.

Non Permanent Resident with a Work Visa

Immigrants who are residing in the United States but do not have a green card are known as non-permanent resident aliens. They are instead identified by their Social Security Number.

In most cases, these people continue to reside in the United States for the purpose of working, but they do not want to be permanently affiliated with the post or project. They still want to buy a house, despite the fact that they won't have steady employment for the foreseeable future, so that they have a somewhere to live in the meanwhile.

Mortgages make the achievement of this goal possible. However, a non-permanent resident immigrant must adhere to the regulations in order to be eligible for a mortgage.

FHA Loan Special Requirements

You are required to provide a written explanation of your plans to continue living in the United States if you are not a permanent resident of the country. A copy of the paperwork with your I-20 number must also be provided, in addition to evidence that you are currently employed.

In addition to that, the lender could inquire about the status of your job every year and request an update from you. In addition to that, the non-permanent resident is going to be required to obtain mortgage insurance (MIP) for the loan. Regardless of the kind of loan being taken out, this is a standard practice for those who do not permanently live in the country.

You may prove that you are legally permitted to work in the United States by presenting the Employment Authorization Document (EAD) that was granted to you by the United States Citizenship and Immigration Service (USCIS).

You are eligible to use the Social Security Number (SSN) that is provided by the Social Security Administration (SSA) if you do not work at a foreign embassy, the World Bank, or another entity that is considered to be comparable by HUD.

FHA Loans and Non Permanent Residents

The Federal Housing Administration (FHA) is a government agency that enables home buyers to get low-down-payment mortgages. If a borrower has a non-permanent resident alien (R) status, they'll have to prove that they have the means to pay off the loan.

The lender will also accept a co-signer, who could be a family member, friend or someone else who has a good credit score, who will be liable if the borrower fails to make the payments.

The FHA has a program called the Non-Permanent Resident Alien Borrower Eligibility, which was created to help non-permanent resident aliens who want to buy a home in the States.

However, there are certain requirements that you'll have to meet to qualify for this program.

For example, you'll need to prove that you have a job and that you can afford your monthly mortgage payments. You'll also need to provide proof of your income and assets.

If you don't meet these requirements, then you won't be able to get an FHA loan for non-permanent resident aliens.

In addition, if you have any other loans or debts on your record, then they will be taken into consideration as well. If they exceed certain limits, then it will be difficult for you to get approved for an FHA loan as well.

The good news is that if your credit score is high enough and if your income is sufficient enough, then it should be possible for you to get an FHA loan even if you are not a permanent resident alien in the States.

Non-Permanent Resident Aliens and FHA Loans

FHA loan application and non permanent aliensAs previously stated, the lender will require a valid work permission document for non-permanent residents, (Form I-765), social security number, and proof of your income.

Keep in mind that the lender might ask for additional documents, like a credit report, your credit score and an appraisal of the property you're interested in buying.

As a foreigner who doesn't live in the U.S. permanently, you should know about the FHA loan's special rules.

The FHA guarantees that a mortgage can be given to a borrower who is not a permanent resident alien if the property will be the borrower's main home, the borrower has a valid Social Security number, and the borrower is allowed to work in the United States, as shown by an Employment Authorization Document from US Citizenship and Immigration Services (USCIS).

Therefore, if you want a mortgage, you should make sure that the house is your main residence, or you may not qualify for the loan.

FHA loan requirements:

  • Two year work history
  • $420,680 typical lending limit 1-unit property,
  • Debt to income ratios of 31% for housing payment and 43% debt ratio
  • Down payment with 500 - 579 FICO score with 10% down payment
  • Down payment of 3.5% with 580 FICO score and above

With that said, it is important to understand that there are also requirements for your credit score.

Permanent Resident Alien Status

A permanent resident alien needs to apply for an FHA mortgage by giving the bank an immigration ID and a legal green card.

The procedures and process are relatively similar to those of a U.S. citizens.

The U.S. Department of State estimates that 13.2 million people hold green cards.

Work Visa and Non-Permanent Resident Alien

Non-permanent resident aliens live in the United States but are not permanent residents.

They have a Social Security Number instead.
These individuals usually stay in the United States to work, but they do not wish to be permanently committed to the project or position.


Can DACA people get an FHA loan?


DACA graphicEffective January 19, 2021, the US Department of Housing and Urban Development (HUD) has clarified Deferred Action for Childhood Arrivals (DACA) beneficiaries' eligibility for FHA mortgage loans  Mortgagee Letter 2021-12.

As a result of the revision to HUD's guidelines, qualified undocumented immigrants who came to the United States as children are now permitted for low-interest house loans.

Obstacles for Non-Permanent Resident Aliens

One obstacle that non-permanent residents face when seeking a mortgage is locating a company willing to extend financing. Although most lending institutions prefer to lend to permanent residents, some will approve financing for non-permanent tenants.

Before you begin trying to find a company to provide you with a mortgage, first ensure the company will deal with non-permanent residents. When you have found a lender who will focus on non-permanent residents, you may need to put down a higher down payment. Lenders will want to make sure you can repay the loan if you lose your job.

There are obstacles for non permanent resident aliens who would like to submit an application for a FHA loan.

U.S. Credit Report and Credit Score

If you haven't spent at least a year in the United States yet, you might run into some difficulties. If you want to borrow money in the United States, you need to have two or three accounts that have been open for at least a year if you want to qualify. Because of this, a lot of individuals decide to hold off on submitting their mortgage application.

The lack of sufficient credit history prevents many non-permanent resident immigrants from being approved for a mortgage loan, despite their desire to do so. In order to construct your own credit score, you will need to make use of your credit for a period of time and possess a genuine Social Security number.

You should bear in mind that in order to determine whether or not you qualify for a loan, certain creditors will want to know whether you have a credit card or an auto loan. Even if your credit report is made up of items like your mobile phone, electric, or water bills, some lenders may nevertheless allow you qualify for their products.

Long-Term Residency and Foreign Nationals

Who can get a loan may be limited by how long they have lived in the country or how long they plan to stay. If you are in the second group, you may still be able to get a loan, but it will have to come from a private lender or a bank.

They can give out loans that were made just for foreign visitors who need a place to stay for a while. Foreign national mortgages are the name for these loans.

Permanent or Non-Permanent Resident Alien Qualification

As an immigrant to the United States, you can get mortgage credit just like a citizen. So, you'll be able to live in your own house in the United States, just like your friends who were born there.

How to Get an FHA Loan if You Are a Non Permanent Resident

When you're applying for an FHA loan as a non-resident alien, you'll need to make sure everything you have is ready to go before starting the process. These necessities include the necessary forms.

Two years of tax returns or 1099 forms.;
Your BCIS (Bureau of Citizenship and Immigration Services) I-20 Form;
Your employer's letter verifying your employment information.
Social Security Number,
Proof of your work eligibility,
Two months of bank statements,
Pay stubs covering the last 60 days
W2’s for the previous two years

After collecting the necessary paperwork, take the following steps:

• Shop for a Lender and submit the required documents

Gift Funds for the Down Payment & Closing Costs 

Gift money boxThe FHA only requires a 3.5% minimal down payment. Coming up with the required down payment can be a challenge for some people, fortunaely, the FHA allows for gift funds that can be used for the down payment and closing costs.

There are strict requirements for the acceptance of gift money, so read the gift fund page tp learn the proceedure for obtaining gift funds.

FHA Mortgage and Seller Concessions

Another way to minimize your cash requirement, is to ask the seller to pay a percentage of the closing and prepaid costs. The seller is permitted to pay up to 6% of the sales price toward the home buyer's expenses. Read more

The FHA program permits co-signers!

Co-signers can help home buyers by adding their income and good credit to the borrower's loan application.

Conclusion

FHA loans are great options for first-time home buyers and borrowers with low credit scores. They’re also accessible to non-permanent residents, but they will have to meet a few extra requirements.

These include a higher down payment, a co-signer, and paying for PMI. If you meet these criteria, you can apply for an FHA loan and buy a home with a low down payment.