FHA Mortgage Changes: What Buyers Can Use Now and What Must Wait

The Federal Housing Administration has put several single-family mortgage changes into effect this summer, including a new path for some existing homes with private wells to qualify for FHA financing.

Other changes affect rehabilitation loans, lender quality-control procedures, closing paperwork and loss-mitigation plans. But one widely discussed change—allowing VantageScore 4.0 and FICO Score 10T—remains a future policy rather than an operational FHA underwriting option as of August 5, 2026.

Private-well waiver is effective now

On July 27, FHA issued a waiver covering distance requirements for individual water-well systems. The waiver is effective immediately and applies only to existing construction.

A property may qualify under the waiver when it meets the applicable local jurisdiction’s distance requirements and the FHA-approved mortgagee documents acceptable water-testing results. FHA defines the local jurisdiction as the health authority, environmental agency or municipality that has inspected, permitted or grandfathered the private water system in its current configuration.

The waiver does not change FHA minimum property standards for new construction, which are governed separately. It also does not mean every home with a private well qualifies. Local health, environmental, municipal, property-condition and insurance requirements still apply.

Buyers considering an existing home with a private well should ask an FHA-approved lender whether the July 27 waiver has been incorporated into its underwriting procedures and what testing records will be required.

June package changed several parts of the FHA process

HUD announced 14 FHA Single Family policy updates on June 23. The changes are separate policy and mortgagee-letter actions, not a new mortgage product.

For homeowners using FHA’s Limited 203(k) rehabilitation program, the maximum number of contractor draw requests increased from two to four per contractor. That may give borrowers more flexibility to pay for work as a project advances, while the program’s other eligibility, inspection and documentation requirements remain in place.

FHA also made appraisal field reviews optional in the lender’s appraisal quality-control process. The change does not eliminate appraisals or broader lender quality-control obligations. It gives mortgagees more discretion over how to review appraisal risk.

The June updates also created a permanent quality-control exception for certain early payment defaults involving mortgages affected by a Presidentially Declared Major Disaster Area. The change removes the need for FHA to issue a separate waiver for each qualifying disaster.

HUD also removed the requirement for mortgagees to provide and retain Form HUD-92900-B, the Important Notice to Homebuyers. That simplifies closing and case-file requirements, but it does not remove the borrower’s other FHA disclosures or mortgage documents.

The loss-mitigation changes clarify trial payment plan rules. They establish a new failure reason when a borrower repeatedly fails to accept a trial plan for the third time, allow payments under a permanent home-retention option to rise after a trial plan when taxes or insurance increase, and limit pre-foreclosure re-review requests to cases in which a change in the borrower’s circumstances affects eligibility. The rules also allow borrowers to make trial-plan payments before the month in which they are due.

Those changes do not erase repayment obligations, foreclosure timelines or borrower eligibility requirements. A homeowner in a trial plan should request written information from the servicer about payment timing, review rights and any changes in taxes or insurance.

New credit scores are not available for FHA underwriting yet

FHA has said it intends to permit VantageScore 4.0 and FICO Score 10T alongside Classic FICO. The agency will continue requiring tri-merge credit reports.

However, FHA has not published implementation dates or additional guidance. Until that guidance is issued, mortgagees must follow existing FHA credit-report policies. Borrowers should not assume that a lender can use either newer score model for an FHA loan today.

The announcement also does not promise easier approval, a lower interest rate or reduced closing costs. Lenders may continue to apply their own underwriting standards, and borrowers still must document income, assets, debts, property condition and insurance.

What borrowers should do

Buyers should ask lenders which FHA changes are already reflected in their procedures, especially if a property has a private well or needs rehabilitation financing. A lender’s adoption of a policy update may depend on its systems, procedures and risk controls.

Homeowners in an FHA trial payment plan should request written information from their servicer about payment timing, review rights and any changes in taxes or insurance. Borrowers who need help understanding mortgage servicing, foreclosure-prevention options or housing complaints can use the Consumer Financial Protection Bureau’s housing resources.

Sources

Look for updates to this story

Discover more from Interactive News

Subscribe to get the latest posts sent to your email.