How potential FHA Staff cuts could affect your homebuying journey

For many first-time home buyers, saving for a down payment is the most challenging part of the buying process. Mortgages that require little or no down payment open up opportunities for first-time homebuyers to enter the market sooner. The Federal Housing Administration (FHA) offers low down payment mortgages, often requiring as little as 3.5% down. However, potential staff cuts at the FHA could slow down loan processing and increase costs for borrowers.

What’s happening with the FHA?
Recent government spending cuts have led to widespread layoffs across federal agencies, and the FHA, a division of the Department of Housing and Urban Development (HUD), could be next. Reports suggest staffing reductions could impact FHA loan processing. Although these changes won’t eliminate FHA loans as an option, they could result in longer processing times, delays in approvals, and possibly higher fees. According to Redfin, FHA loans accounted for about 15% of mortgage home sales in December 2024, so a disruption could affect many potential buyers.

How could FHA cuts affect you?

• Longer approval times: Fewer staff members mean fewer people available to process loan applications, which could slow approvals and extend closing timelines. If you plan to use an FHA loan, be prepared for potential delays.
• More expensive loans: Loan officers may have to spend more time handling FHA loans due to a backlog, potentially leading to higher processing fees. These added costs could reduce your available funds for down payment or closing expenses.
• Competitive disadvantages: In fast-moving housing markets, sellers may be less inclined to wait for an FHA loan to clear if it takes longer than a conventional loan. This could make it more challenging to secure a home, particularly in competitive areas.

How to prepare as a first-time homebuyer
If you’re planning to buy a home with an FHA loan, here’s how you can navigate these potential challenges:

• Start the pre-qualification process early: If FHA staff reductions slow processing times, get pre-qualified before making an offer to avoid potential delays.
• Consider state and local assistance programs: Many states and municipalities offer down payment assistance programs that can supplement or replace an FHA loan. Research these options to see if you qualify for alternative funding.
• Have a backup plan: Explore other loan options, such as conventional loans with low down payment requirements. If you qualify for a conventional loan, it could offer a faster approval process.
• Work with PRMI: At PRMI, our loan advisors are familiar with FHA loans. We monitor recent policy changes to help streamline the process and minimize roadblocks for our clients.

Apply now for an FHA loan
For now, FHA loans are still available, but potential staffing cuts could lead to longer wait times and higher costs. By planning ahead and exploring alternative mortgage programs with your PRMI loan advisor, you can position yourself for a smoother home-buying experience despite these uncertainties. Reach out today to schedule an appointment with your local PRMI loan advisor.