Home Buying and Home Loans Guide for DACA Recipients (2023)
The Deferred Action for Childhood Arrivals (DACA) is a program that allows those who were brought to the U.S. as minors (called “Dreamers”) to stay in the country legally. Dreamers with DACA status are not U.S. citizens but have much more protection than others with undocumented status.
For many DACA recipients, buying a home means fulfilling part of the dream that drove their parents to America. But while DACA recipients are allowed to buy a home and be approved for a mortgage, the process may not be as easy as it would be for citizens or permanent residents. Still, plenty of resources are available for DACA recipients to achieve homeownership.
History of the DACA Program The Deferred Action for Childhood Arrivals (DACA) program was created in 2012 to help avoid deportation for individuals brought to the U.S. by their parents. As of December 2022, there were more than 580,000 DACA recipients. “[DACA] protects an individual from being removed from the U.S., and it is renewed in increments by the United States Citizenship and Immigration Services (USCIS), so long as the Supreme Court does not overturn it,” says Philadelphia-based immigration attorney, Wendy Castor Hess, partner with Landau, Hess, Simon, Choi & Doebley.
The U.S. Congress has not established a path to permanent citizenship for DACA recipients. There have been many attempts throughout the years to solidify a plan for DACA recipients to receive citizenship similar to other immigrants, but no legislation has successfully passed.
Challenges DACA Recipients Face When Buying a Home Once you have DACA status, you can apply for a Social Security number. This can open up many legal, educational, professional, and financial opportunities, including buying a house. Even though DACA recipients are legally allowed to buy a home, it can be difficult. These individuals are more likely to have incomes below the federal poverty level, making saving for a down payment more challenging. One step toward an easier mortgage process is having a clear financial record. Hess advises DACA recipients to declare all income on their taxes, even if they’re being paid in cash. “This is especially important since some DACA clients who didn’t have a Social Security number prior to being granted DACA, have not, in the past, fully reported income—and this lack of financial history can result in a lower ability to borrow,” Hess says.
DACA Home Buying Loan Options DACA recipients may be able to access some government and lender assistance if they are not able to afford a down payment. Below are a few of these options.
DACA FHA Loans The Federal Housing Authority (FHA) offers special mortgages with lower down payment requirements than conventional mortgages. Borrowers can put down as little as 3.5% of the purchasing price of the home, compared to 5% for traditional mortgages. As of 2021, DACA recipients are eligible to receive FHA loans. General qualifications include these:
Have a Social Security number
Use the home as a primary residence
Be eligible to work in the U.S.
FHA loans have lower credit score requirements than conventional mortgages. Borrowers only need a score of 500 or higher to qualify for an FHA loan, whereas regular mortgages require a score of 620 or higher. However, if your score is between 500 and 579, you must put down 10% to be approved for an FHA loan.
Fannie Mae HomeReady Loan The Fannie Mae HomeReady Loan is designed for low-income borrowers and accepts DACA recipients. Borrowers can put down as little as 3%, which is even lower than the down payment minimum for FHA loans. The maximum loan limit varies depending on the area. Eligible borrowers cannot have an income that is more than 80% of the area’s median income. To find your limit, use the Fannie Mae map. To qualify for a Fannie Mae HomeReady Loan as a DACA recipient, you must meet these requirements:
Have a Social Security number or Individual Taxpayer Identification Number
Must have current immigrant status documented through employment verification, Green Card, work visa, or other qualifying document
Meet standard income and employment requirements that apply to all borrowers (earn 80% or less of your area’s median income)
Conventional Loans A conventional loan is the most common type of mortgage, but it can be harder for DACA recipients to qualify for. Each lender has its own requirements, but the minimum down payment on a conventional loan is usually 5%—higher than the other programs on this list. The minimum credit score for a conventional loan is 620, which is also higher than other types of mortgages. On the plus side, interest rates and mortgage insurance fees are often lower for conventional loans than for other mortgage programs. Home Buying Process for DACA Recipients
If you are a DACA recipient looking to purchase a home, use the following tips as a guide for the home buying process. Gather Required Documents for a DACA Mortgage When getting a mortgage as a DACA recipient, you will usually have to provide the following information:
Proof of DACA status: This may include your Employment Authorization Document (EAD), which is issued by the United States Citizenship and Immigration Services.
Proof of identification: A driver’s license may be necessary to verify your identity.
Bank statements: Most mortgage lenders will require that you provide bank statements from the past few months.
Employment information: You may have to provide proof of employment, like a pay stub or company letter showing your current job.
Tax returns: If you are self-employed, you may need to provide two years of tax returns to show your business income.
Determine Your Budget Before shopping for a home, you must determine your maximum monthly housing payment. This will include your mortgage, property taxes, and homeowners insurance. Having that number will help you figure out how much home you can afford. You should also factor in monthly maintenance costs and utility fees, which may be higher than what you currently pay as a renter. Find a Qualified Real Estate Agent After determining your budget, you can look for a real estate agent to help you begin the home shopping process. You should interview several real estate agents to find one that understands your needs. Ideally, you should find an agent that has dealt with DACA recipients in the past and can steer you to the right home buying program.
Shop for Homes You Are Preapproved For Getting preapproved for a mortgage means a lender will verify how much money you qualify for. After this, you can start shopping around for a home with a better understanding of how much you can afford. Having preapproval will make it easier to get your offer accepted because the seller doesn’t have to worry that you’ll be denied by a lender.
Make an Offer and Have an Inspection Done Once you find your dream home, it’s time to make an offer. If accepted, you should schedule a home inspection to determine any major problems that may nix the deal or require repairs before moving in. Inspections are usually optional, but they’re the best way to avoid any surprises before buying a home. If you discover major issues, you can ask the seller to fix them before closing.
Close on Your Home and Move In Closing typically occurs about a month after accepting the offer. At closing, you must make the down payment, and you may receive any applicable closing credits from the seller or lender. Once you have closed on a home, you can move in immediately or take your time to paint or make any repairs.
5 Organizations That Help DACA Recipients and Dreamers Various organizations offer support services for DACA recipients, including housing aid. You’ll find information for some national organizations below, but we recommend looking for local options in your area too.
United We Dream United We Dream is an organization that supports both undocumented and documented immigrants. DACA recipients can find help renewing their Dreamer status. The group also advocates for better immigration policies to make life easier for all immigrants.
National Immigration Law Center DACA recipients who need legal help can use the National Immigration Law Center, which also advocates on behalf of immigrants.
Immigrant Legal Resource Center The Immigrant Legal Resource Center can help you find a lawyer if you need one. They also educate immigrants on their general legal rights and advocate for better laws favoring immigrants.
National Association of Latino Community Asset Builders Latino DACA recipients who want to start or run their own businesses can apply for small-business grants through the National Association of Latino Community Asset Builders. The group also supports affordable housing and offers loans to Latino business owners.
National Immigration Forum The National Immigration Forum is a lobbying group that advocates for more opportunities for all immigrants. They have a strong focus on ensuring more protections for DACA recipients.
Our Conclusion Home buying can be complicated, and DACA recipients may face even more challenges. But that doesn’t mean it’s impossible. DACA recipients can achieve their homeownership goals by taking the right steps and finding help when needed.
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By This Old House Reviews Team 6/29/2023