The FHA Gives DACA Recipients Equal Access to Home Loans

The Federal Housing Administration (FHA) has leveled the homeownership playing field for “Dreamers.” Individuals covered by the Deferred Action for Childhood Arrivals (DACA) program – or Dreamers – are now able to access the FHA’s low-down-payment mortgage program.

Under this new policy, Dreamers who are eligible to work in the U.S. can obtain an FHA loan by meeting standard loan requirements and providing a few additional documents beyond what’s required for U.S. citizens.

FHA loans are the most common loans for first-time homebuyers because of the unique benefits they offer. These loans are available in every state and require a small down payment minimum (3.5%), a lower FICO score than conventional loans, and accept a higher debt-to-income ratio than other types of mortgages. All borrowers, including Dreamers, must meet FHA’s standard requirements.

• A FICO score of at least 580 for those making a 3.5% down payment.
• A FICO score between 500 and 579 for those able to make a 10% down payment.
• A debt-to-income ratio less than 43%.
• A required Mortgage Insurance Premium (MIP).
• The home must be the borrower’s primary residence.
• The borrower must have a steady income and proof of employment.

According to a release issued by the United States Department of Housing and Urban Development (HUD), in addition to the FHA’s standard requirements, DACA applicants will also need:

• A valid Social Security Number (SSN), except for those employed by the World Bank, a foreign embassy, or equivalent employer identified by HUD.
• Eligibility to work in the U.S., as evidenced by the Employment Authorization Document issued by the U.S. Citizenship and Immigration Services (USCIS).

Dreamers with an Employment Authorization Document that is about to expire can still be considered for an FHA loan based on a history of previous renewals. The FHA says, “If the Employment Authorization Document will expire within one year and a prior history of residency status renewals exists, the lender may assume that continuation will be granted. If there are no prior renewals, the lender must determine the likelihood of renewal based on information from the USCIS.”

Individuals in the DACA program may qualify for conventional loans as well. Fannie Mae also offers home loans to non-U.S. citizen borrowers who are lawful permanent or non-permanent residents of the United States.

To qualify for a Fannie Mae backed loan, individuals with unexpired DACA status must:

• Provide an Individual Tax Identification Number
• Be salaried with an acceptable employment history.
• Provide acceptable, non-traditional credit.
• Meet all other standard loan requirements.

The FHA’s policy shift, and Fannie Mae’s lending options, open the door to homeownership for roughly 700,000 recipients of the DACA program.