In 2021 the U.S. Federal Housing Administration (HUD) announced that DACA recipients, who were in the market of purchasing a home, were eligible to apply for low interest rate and flexible FHA loans.
The loan has been popular with 7.8 million homeowners due to its higher debt to income ratio exceptions, a minimum 3.5% down payment requirement, among other benefits. Dreamers are able to jump into the market without the need of having the 20% standard recommended down payment for private mortgages, making the path to homeownership more accessible than ever before.
Note: The FHA loan in itself is not guaranteed. Applicants still need to find FHA lenders who will make a decision based on your qualifications.
Also read: How DACA changed in 2021
What are the benefits of FHA loans?
Aside from the low down payment percentage, FHA loans are available for individuals who may not have a great credit score, or those who owe debts that would otherwise make them ineligible to borrow in other settings.
For context: A credit score is a figure that reflects your creditworthiness by analyzing your credit history, types of loans, among other things– the higher the better. (New York’s average credit score is 703)
The median credit score in the United States for those taking out a mortgage is 786. In comparison, FHA loans can be given to individuals with credit scores of 580* who might be eligible to put 3.5% as down payment. Others who have a credit score of below 580 but more than 500 might be required to put down 10%.
FHA loans are also more forgiving to individuals who have higher than average debt-to-income ratios (DTI). DTI measures the amount you owe each month to the amount of income you earn– a high DTI could make individuals ineligible for certain loans, as the responsibilities might exceed the current level of income.
In essence, the FHA loans are a great option for homebuyers who may not have a perfect credit score, or acquired debts due to emergencies out of their control. However, it is still encouraged to have a healthy credit score in the United States as it opens more doors and opportunities (such as low interest rates) for those who want to take out loans.
To apply, individuals must find an FHA lender institution near them as they would with other conventional mortgage lenders.
For information about FHA loans and program in NY, please visit:
FHA Resource Center | email | toll-free: (800-225-5342) | TTY: (800) 877-8339
Also read: DACA renewal checklist