It’s official. DACA recipients who legally work in the U.S. can now apply for mortgages backed by the FHA. The Department of Housing and Urban Development put an end to years of confusion and controversy surrounding Dreamers’ eligibility for FHA-backed mortgages. Making Wednesday is the first day since the formation of the DACA program that things are clear cut.
In 2019, HUD officially announced that the FHA would no longer back DACA mortgages. Its decision came from the assertions that the determination of citizenship and immigration “is not the responsibility of HUD and the department relies on other government agencies for this information.”
Before the announcement, the FHA-single family handbook stated, “Non-US citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages.” Which effectively neutralized DACA recipients’ chances of getting this type of mortgage. This language was initially incorporated into the handbook by the Bush Administration in 2003 and again by the Obama Administration in 2014.
The DACA program was established in 2012. So the language predated Dreamers from the start. Instead of updating the handbook in 2012, when the problem first became apparent, Dreamers faced uncertainty for nine years before HUD finally decided how to handle FHA-backed loans.
2021 finally changed things. In an effort to bypass all past confusion, HUD announced that the FHA is waiving that subsection entirely. The handbook will be updated, and that language will be removed completely, leaving no question of eligibility.
DACA mortgage timeline
- December 2003 — Non-U.S. citizen language was added to the FHA handbook by the Bush administration –– the start of the problem for DACA recipients.
- June 2012 — DACA program is established.
- September 2014 — The Obama administration incorporates language into the FHA handbook.
- March 2019 — HUD states they are not denying DACA recipients mortgages.
- March 2019 — A HousingWire investigation uncovered evidence from dozens of different lenders that FHA financing is not approved for DACA recipients even though HUD stated that policies had not changed.
- June 2019 — DACA recipients are officially declared ineligible for FHA-backed loans by HUD.
- June 2020 — Senate and House of Representatives ask HUD Office of Inspector General to investigate if HUD officials “knowingly misrepresented to Congress the implementation and enforcement of this new policy.”
- June 2020 — Trump administration attempts to terminate the program entirely.
- January 2021 — HUD announces that FHA will back DACA mortgages.
Requirements for an FHA-backed mortgage
The other requirements for an FHA-backed mortgage are still in effect for all borrowers, including DACA recipients. If you plan to apply for a mortgage, save yourself some time and look at the requirements now, so there are no surprises later. Gather all the information and requirements needed; that way, when you apply, there are no opportunities for things to slow down.
[ Read: What Is an FHA Loan? ]
- The borrower’s principal residence must be the residence the mortgage is for.
- Must have a valid Social Security Number. Not including people employed by the World Bank, a foreign embassy or equivalent employer identified by HUD.
- The borrower is eligible to legally work in the U.S.
- A debt-to-income ratio of less than 43%.
- FICO® score at least 580 = 3.5% down payment.
- FICO® score between 500 and 579 = 10% down payment.
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