Nikki Waller, Director of Financial & Relational Development
For many months, the Federal Housing Administration (FHA) has been uncertain of if they were backing mortgages for Deferred Action for Childhood Arrivals (DACA) recipients or not. The Department of Housing and Urban Development (HUD) has finally come to a decision on this issue.
That decision is no.
This decision is a reversal from HUD’s previous answers to questions about whether FHA is backing mortgages for Dreamers. HUD has stated numerous times that its policies surrounding DACA borrowers has not changed, despite the confusion in the mortgage industry.
Reported by Buzzfeed initially:
“Because DACA does not confer lawful status, DACA recipients remain ineligible for FHA loans,” Len Wolfson, a Department of Housing and Urban Development official, wrote in a letter to California Democratic Rep. Pete Aguilar on Tuesday, June 11th.
Is this different?
The FHA has never had any explicit policy for DACA recipients. The FHA handbook states that only an Employment Authorization Document – which DACA recipients have – is necessary “to substantiate work status” for non-citizens in order to qualify for the housing loans.
Even though the FHA has denied its standing on DACA recipients, Fannie Mae hasn’t. Fannie Mae recently released it’s eligibility guidelines which states they will accept the employment authorization document of Dreamers.
What’s the difference between Fannie Mae & FHA?
Fannie Mae is a conventional mortgage that requires a 640-680 minimum credit score with a 5%-20% down payment, depending on the loan product. Fannie Mae mortgages allow higher debt to income ratios, so for the borrower with additional debt (such as student loans), this product might make more sense.
FHA mortgages have lower credit score requirements. Credit scores can be as low as 580 and the required down payment is only 3.5%. You can still qualify for an FHA mortgage with a credit score below 580 if you have a higher down payment.
The FHA mortgage is intended to make homeownership more accessible – especially to those with lower incomes and fewer opportunities to save money. It’s ideal for first time homebuyers and usually is the perfect product to launch an individual into building wealth. With our understanding, it is a great product for those who are considered “Dreamers.”
Many local banks offer private mortgage products that don’t utilize federal financing. As a result, HOPE Housing Counselors will begin compiling a list of local lenders who will provide mortgages to DACA recipients.
If you are a DACA recipient and you’re ready to purchase a home, contact HOPE to take the first steps towards becoming a home owner. DACA recipients who are income qualified are eligible to receive Down Payment Assistance from HOPE.