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    America’s Dreamers now have another pathway toward homeownership, thanks to a policy change from the Department of Housing and Urban Development. According to an announcement from the agency, DACA recipients — or those who fall under the Deferred Action for Childhood Arrivals program — can now apply for FHA mortgage loans.

    Previously, DACA recipients were ineligible for these government-backed mortgages due to a clause in the FHA handbook that stated, “Non-U.S. citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages.”

    The agency is now waiving that phrase, saying it “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 be clear, the change doesn’t mean all DACA recipients can get an FHA loan. In order to qualify, they’ll still need to meet the other requirements of the loan program. This means they must be purchasing a primary residence and they’ll need a valid Social Security Number and be eligible to work in the U.S., too. 

    Lenders will also have credit score minimums and debt-to-income ratios they’ll need to meet as well. These vary by mortgage company.

    The perks of FHA mortgage loans

    For DACA recipients that can qualify, the benefits could be significant. FHA loans require just 3.5% down — so $12,000 on a $200,000 home. They also come with great interest rates, and the minimum credit score can go as low as 500 (though individual lenders may set stricter ones). 

    All of these things combined can help lower the barrier to homeownership and make purchasing a home much more affordable for DACA recipients.

    Be careful, though: Many times, FHA loans may mean more in closing costs and a higher monthly payment than other loan options would. This is because FHA loans require mortgage insurance — both upfront and over the course of the loan’s term. This means you’ll pay a fee at closing, as well as part of your monthly payment. 

    DACA recipient and thinking of buying a home?

    Are you a Dreamer considering a home purchase? Get in touch with an Embrace Home Loans office in your area today. We’ll help you determine the best mortgage option for your budget and goals.

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