Buying a property just got a lot easier for DACA recipients, thanks to a change announced by the Department of Housing and Urban Development recently. According to the agency, U.S. residents with DACA status can now apply for FHA loans.
Prior to January 19, 2021, DACA recipients -- also called Dreamers -- had been ineligible for these mortgages due to a line in FHA’s handbook stating, "Non-U.S. citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages."
Now HUD has moved to waive this clause, stating: "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. To avoid confusion and provide needed clarity to HUD’s lending partners, FHA is waiving the above-referenced FHA Handbook subsection in its entirety."
FHA has said it will remove the outdated language in the next release of its handbook.
What the change means
HUD’s announcement will make buying a property significantly easier for many DACA recipients.
FHA loans have some of the least stringent qualifying standards out there, requiring just a 500 to 580 credit score minimum to qualify. Lenders can also accept up to 50% debt-to-income ratios, too.
FHA loans can also make homeownership more affordable. They come with low interest rates, and they require a mere 3.5% down, meaning buyers need less cash up front and could potentially purchase a home or property sooner than with other mortgage products.
Qualifying as a Dreamer
To be clear, DACA recipients will still need to meet other qualifications of the FHA loan program in order to take out one of these mortgages. They must have a valid Social Security Number, be authorized to work in the U.S., and meet the credit and income standards set forth by their chosen mortgage lender.
Additionally, FHA loans can only be used on primary residences, so the Dreamer will need to live in the home in order to finance it through the FHA. (Living in one unit of a multi-unit property is possible here. Many investors do this, renting out the additional units for extra income.)
The bottom line
If you’re a DACA recipient, you can now leverage one of the most affordable mortgage loan programs currently available. To learn more about FHA loans or other mortgage options you can use to buy a property, check out our loan guide.