Ask the Underwriter: Are DACA recipients eligible for FHA loans?

Ask the Underwriter is a regular column for HousingWire's new LendingLife newsletter, addressing real questions asked to, and answered by, professional mortgage underwriter, Dani Hernandez. 

On Wednesday, a federal judge said that the Trump administration's decision to terminate the Deferred Action for Childhood Arrivals, or DACA, program, was based on the “virtually unexplained” grounds that the program was “unlawful” and ruled that the protections must stay in place and that the government must resume accepting new applications. Under Judge Bates’ ruling, unless the administration can justify its decision within 90 days, the cancellation of the program will be rescinded.

This is great news for the Dreamers! But what does it mean for DACA borrowers who are looking to buy a new home this spring… Do they have to wait another 90 days?! The answer is NO! If you read my article a few weeks ago, you know that Dreamers are eligible for conventional financing through Fannie Mae… but many of you have asked if DACA recipients are eligible for FHA loans – They are!

This week I’ll walk you through the FHA’s guidelines and explain exactly what documentation is needed to get your DACA borrowers into a new home using FHA financing!

FHA Guidelines:

Handbook 4000.1 II.A.1.b.ii.(A)(8)-(9)

United States (U.S.) citizenship is not required for eligibility. The lender must determine the residency status of the borrower based on information provided on the application and other applicable documentation. In no case is a Social Security card sufficient to prove immigration or work status.

A borrower who is a non-permanent resident alien may be eligible provided:

• the property will be the borrower’s principal residence;
• the borrower has a valid Social Security Number (SSN), except for those employed by the World Bank, a foreign embassy, or equivalent employer identified by HUD;
• the borrower is eligible to work in the U.S., as evidenced by the Employment Authorization Document issued by the USCIS; and   
• the borrower satisfies the same requirements, terms and conditions as those for U.S. citizens.  

How to Document and Qualify:

DACA Recipients are considered Non-Permanent Residents. FHA has four basic requirements that non-permanent residents must meet in order to be eligible for an FHA Loan.

1. The property will be the borrower’s principal residence – FHA only provides financing for primary residences so the subject property must be your borrower’s principal residence.
2.  The borrower has a valid Social Security Number (SSN) – The Lender must validate and document an SSN for each borrower, co-borrower, or cosigner on the mortgage by:  

1. Entering the borrower’s name, date of birth, and SSN in the Borrower/Address validation screen through FHA Connection (FHAC); and   
2. Examining the borrower’s original pay stubs, W-2 forms, valid tax returns obtained directly from the IRS, or other document relied upon to underwrite the mortgage; and  
3. Resolve any inconsistencies or multiple SSNs for individual borrowers that are revealed during mortgage processing and underwriting using a service provider to verify the SSN with the Social Security Administration (SSA).  

3. The borrower is eligible to work in the U.S., as evidenced by the Employment Authorization Document issued by the USCIS – The Employment Authorization Document is required to substantiate work status.
   1.  If the Employment Authorization Document will expire within one year and a prior history of residency status renewals exists, the lender may assume that continuation will be granted.
   2. If there are no prior renewals, the lender must determine the likelihood of renewal based on information from the USCIS.  
4. The borrower satisfies the same requirements, terms and conditions as those for U.S. citizens – This just means that all the other requirements  that apply to a US Citizen, also apply to DACA Recipients. Basically, treat them like you would everyone else!

If your DACA borrower meets these four requirements, they are eligible for an FHA Mortgage! So, go spread the good news and start making the American Dream a reality for your Dreamers, today!