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In January, the Federal Housing Administration (FHA) updated its policy to permit DACA recipients, also known as Dreamers, to qualify for federally-backed mortgages.
The change means that some undocumented immigrants who arrived in the U.S. as children are now eligible for home loans targeted at lower-income borrowers.
If you’re a Dreamer who now qualifies for an FHA loan, here’s what you need to know.
Dreamers were previously barred from receiving FHA mortgages under an agency policy that prohibited “non-U.S. citizens without lawful residency in the United States” from obtaining the loans.
In January, the agency updated its guidance, and plans to scrub that language from future versions of its handbook.
“The term ‘lawful residency’ pre-dates DACA and thus did not anticipate a situation in which a borrower might not have entered the country legally, but nevertheless be considered lawfully present,” the agency said in a statement announcing the change.
What does this mean for Dreamers?
This change is a major boost to DACA recipients, who are now more likely to be able to become homeowners and benefit from the equity and stability that brings.
“This recent eligibility expansion will open doors for low-income DACA recipients to the new opportunities that come with owning a home and will help provide stability and a safety net to them and their families,” Sarah Cartagena, a senior immigration policy analyst for the Latino Policy Forum told Bankrate. “During the last year, many Latino DACA recipients and immigrant families have struggled to maintain a roof over their head. The stability that comes with owning a home that has a federally-backed mortgage can help families progress from a devastating pandemic.”
What do DACA recipients need in order to apply?
Any FHA mortgage applicant needs to provide documentation to prove their eligibility for the loan.
Here are the minimum qualifications, according to the FHA:
- A valid Social Security Number or qualifying employer ID from the World Bank or a foreign embassy
- Employment authorization from the U.S. Citizenship and Immigration Services
- Minimum credit score of 580 for a 3.5 percent down payment or 500 for a 10 percent down payment
- Debt to income ratio less than 43 percent
The FHA also provided the following guidance to partnering lenders about work authorization documents: “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.
Keep in mind, FHA mortgages can only be used for the borrower’s primary residence.
What are alternatives to FHA loans for Dreamers?
DACA recipients have always qualified for conventional, conforming loans, but those can be more difficult to secure for lower-credit borrowers. If you’re a Dreamer looking to buy a home, it’s worth shopping around and being open with lenders early on about your immigration status. A good mortgage broker or lending professional should be able to help you find the home loan that’s right for you.
The FHA’s policy change means its loans are now available to DACA recipients, who previously were prohibited from receiving its mortgages. “Dreamers are some of the most inspiring, courageous, and innovative people in this country.” said Adina Appelbaum, co-creator of Immigrant Finance. “Increased access to funding for federally-backed mortgages will empower Dreamers to develop more financial stability so they can focus on reaching their potential and expanding the wide-reaching impact they have already made in this country.” The new policy means the American Dream may now be attainable for more Dreamers than ever.
- FHA loans: Everything you need to know in 2021
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