New FHA Eligibility for DACA Recipients!
The Department of Housing and Urban Development announced on January 19, 2021, that the FHA would once again back mortgages for DACA recipients. The announcement comes as great news as it will be the first time since 2019 that DACA recipients will be eligible for FHA loans.
History of FHA Loans for DACA Recipients
Established in June of 2012, Deferred Action for Childhood Arrivals, or DACA, granted special protections for undocumented children who entered the country under the age of 16 and were under 31 at the time. Among other protections, DACA allows recipients to legally work in the U.S. and prevents involuntary removal from the country for a renewable two-year term.
In 2003, the FHA Housing Handbook stated, “non-U.S. citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages.” However, in 2015, the Obama Administration deemed the “lawful residency” language unclear. While borrowers may not have entered the country legally, they may have lawfully resided in the U.S. Further, lawful residency existed before DACA, creating confusion around how the FHA should manage mortgages for DACA recipients. Following the uncertainty under the Trump Administration, HUD announced in 2019 that FHA would not back mortgages for DACA recipients.
DACA Recipients Eligibility Announcement
On January 19, 2021, the FHA completely waived the section containing the “lawful residency” language, citing that HUD cannot establish citizenship and must instead rely on other government agencies.
For more questions about DACA eligibility, check out our frequently asked questions!
What does this mean for DACA recipients?
This change creates new opportunities for DACA recipients and their dreams of homeownership. Homeownership is a vital component to legitimize your position in this country. For those who are yet without a path to citizenship, owning a home on U.S. soil can be a big boost of confidence and show how committed they are to becoming a U.S. citizen.
In particular, FHA loans are excellent options for those who seek smaller down payment amounts or have lower credit scores. Previously, DACA recipients were limited to conventional loans with Fannie Mae only. Conventional loans also come with stricter requirements than FHA. With down payment minimums of 3.5% and credit score minimums of 530, FHA loans offer the most accessibility, allowing more people to achieve their dream.
Because of the confusion from the “lawful residency” language, many lenders would simply not approve DACA applicants. Now, the government recognizes DACA recipients as valid applicants, meaning the Fair Housing Act protects them.
How to Apply for an FHA Loan as a DACA Recipient
Before you apply for any loan, you should ensure you meet the minimum requirements. The requirements for an FHA loan are:
- the property will be the borrower’s principal residence;
- the borrower has a valid Social Security Number (SSN), except for those employed by the World Bank, a foreign embassy, or equivalent employer identified by HUD;
- the borrower is eligible to work in the U.S., as evidenced by the Employment Authorization Document issued by the USCIS; and
- the borrower satisfies the same requirements, terms, and conditions as those for U.S. citizens
The Employment Authorization Document is especially important for DACA recipients as it substantiates work status. If the Employment Authorization Document will expire within one year, but a history of residency status renewals exists, the lender may assume that renewals will continue. However, if there are no prior renewals, the lender must determine the likelihood of renewal based on information from the USCIS.
For more answers to your DACA questions, check out this article, where we give answers to some of the most critical inquiries. If you are unsure about your residency status but want information on purchasing a home with an FHA loan, contact an On Q Financial mortgage consultant to learn how to apply!
The following loan scenario is only an example. Actual amounts, fees, and rates vary depending on each individual borrower’s situation and additional factors. Loan example is based on a 30 year fixed FHA mortgage loan with 3.5% down. Amounts are based on a loan amount of $200,000, interest rate of 2.750%, APR of 3.703%, and down payment of $7,000 as well as estimated additional funds due at closing of $3,927.55. Approximate monthly payment of $1,028.71. Loan Amount includes 1.75% upfront fee. Loan scenario does not include additional fees associated with monthly mortgage expenses such as HOA fee. All amounts shown are estimates and will vary for each loan. All figures are given for comparison purposes only and are not a commitment to lend or extend credit. Program availability is subject to change without notice. This is not an offer for extension of credit or a commitment to lend. Additional restrictions may apply. On Q Financial, Inc. is an Equal Housing Lender. NMLS 5645 |
About the Author
Before opening On Q Financial in 2005, John Bergman originated and funded 450 units a year as a loan officer. He founded the company with just $1M of personal life savings—committed to his vision for building the best independent mortgage organization in the industry.View John's Profile