A Guide To DACA Home Loans

DACA (Deferred Action for Childhood Arrivals) is a government program created for undocumented individuals brought to the United States as children who were raised in the U.S. and primarily identify as American, even though they lack official citizenship in the country. They are sometimes referred to as “DREAMers” as they benefit from the Development, Relief, and Education for Alien Minors Act, which grants temporary conditional residency with the right to work.

Current estimates put nearly 600,000 individuals in the DACA program. With many of these young adults aging into traditional American milestones like homeownership each year, it makes sense for DACA recipients to investigate options for buying a home. As of 2021, there are several types of home loans available to DACA recipients, including Federal Housing Administration (FHA) loans. Let’s take a look at how DACA recipients can obtain an FHA home loan and buy a house with undocumented status.

Can DACA Recipients Apply For Home Loans?
In short, yes, DACA recipients can buy a house in the U.S. Immigration status is one of the protected categories under the U.S. Department of Housing and Urban Development’s Fair Housing Act, meaning that DACA recipients can’t be denied a home loan due to their immigration status. That said, there are types of loans and procedures that pertain to DACA recipients, so the home-buying process could look a little different for these home buyers than it does for others.

DACA, Defined
Before we explore the home loan options available for DACA recipients, let’s take a closer look at the DACA program. DACA is a policy meant to protect children who were brought to the United States unlawfully by enabling them to receive a 2-year deferral on deportation.

The premise of the program is to shelter DACA recipients from deportation and enable them to obtain work permits, Social Security numbers, and state-issued photo identification so they can continue to live in the United States without fear of being sent back to their country of origin.

Requesting DACA Status
Initially, individuals could request DACA status if they:

Came to the U.S. before turning 16 years old
Continuously lived in the country since June 15, 2007
Were under the age of 31 on June 15, 2012
Don’t have a criminal record or any type of criminal history
What DACA Does
There is some confusion about what protections the program does and does not provide. DACA does not pave the way for recipients to obtain lawful citizenship, nor does it allow recipients to obtain lawful status via a visa or green card, but participants can renew DACA eligibility when the 2-year term expires and continue to stay in the country as long as their status continually renews.

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DACA FHA Loan Eligibility
Early in 2021, the FHA clarified its policy on home loans for DACA recipients. Previously, they were unable to obtain an FHA loan, but now noncitizen U.S. immigrants enrolled in the DACA program are eligible to apply.

DACA FHA Requirements
DACA borrowers applying for an FHA loan need the following:

  • They require a minimum 3.5% down payment and a minimum 580 credit score.
  • The property must be the borrower’s primary residence.
  • The borrower must have a valid Social Security number (SSN).
  • The borrower must be eligible to work in the U.S. and provide an Employment Authorization Document (EAD) stating such to the lender.
  • The EAD must be issued by the U.S. Citizenship and Immigration Services (USCIS) in the C33 category.
  • Any previously expired EAD card(s) must be included with the application.
  • Otherwise, the FHA requirements for obtaining a mortgage are the same for DACA recipients.

Other DACA Home Loan Options
More options are likely to be added as other organizations update their policies. However, here is a current list of all mortgage options for those in the DACA program.

Conventional Loans
Previously, conventional loans through private lenders were the only options for DACA recipients who wanted to take on a mortgage to buy a home, but this option can be tricky.

Requirements and restrictions will vary from lender to lender, and it can be difficult for a DACA recipient to know if they’ve been approved or not. For those who want a conventional loan, it’s best to consult with a lender who has experience working with DACA recipients.

Fannie Mae Conforming Loans
Known as the “Fannie Mae HomeReady Loan” DACA recipients can qualify for a government-sponsored Fannie Mae mortgage if they can provide:

A Social Security number or Tax ID, and an unexpired employment authorization document (EAD) to establish proof of legal presence in the U.S.
Proof of income (W-2s, pay stubs, and/or bank statements)
How To Buy A House As A DACA Recipient
In addition to knowing the available loan options, it’s also important to know what the home-buying process looks like as a DACA recipient. For the most part, it’s the same as the home-buying process for other buyers. Here’s what the process looks like, as well as any notable differences that DACA home buyers should know about.

1. Choose A Lender And Loan Type
The first thing you’ll want to do when buying a house as a DACA recipient is research potential lenders and loan options. Don’t be afraid to shop around and see who will give you the most favorable loan terms. Your lender can also answer any questions you have about your loan options and make recommendations as to which might be best for your situation.

2. Get Your Mortgage Preapproval
Once you choose a lender, you’ll be able to get your initial mortgage approval. You’ll fill out an application, which will ask you questions about your citizenship and residency status. As part of the initial mortgage approval process, your lender will also ask for documentation surrounding your finances to ensure that you’ll be able to qualify for a mortgage.

3. Provide Your DACA Documentation
As a DACA recipient, you’ll need to provide proof of your eligibility to legally live and work in the U.S. Your current Employee Authorization Document (EAD), any expired EAD cards and your social security card will all help your lender verify your eligibility for a DACA home loan.

4. Find A House And Make An Offer
This is the fun part — finding a house. You’ll probably want to work with a real estate agent to find a house that checks all your boxes. Additionally, your REALTOR® will be able to help you prepare all the necessary paperwork to make an offer once you find the right home.

5. Get An Inspection And Go Through Underwriting
Once your offer is accepted, you’ll want to order a home inspection to ensure the home is in good condition. Additionally, your lender will order an appraisal to ensure the home is worth the money they’re lending you to buy it. Then, your lender will verify all your financial information and officially qualify you for your mortgage.

6. Close On Your Home
After your home inspection and the underwriting process are complete, you’ll be ready to close on your new home. You’ll need to have money for your down payment and closing costs at the time of closing.