If you are a “Dreamer,” one of the hundreds of thousands who have benefited from the Deferred Action for Childhood Arrivals policy, you may assume that getting a home loan would be a challenge. After all, you are not an official citizen of the United States, so banks may not be willing to loan you hundreds of thousands of dollars.
But there is an option. Working with the right lending agent, you can secure a loan that fits your needs and helps establish homeownership right here in the United States.
What is DACA?
First, let’s take a step back are review what DACA is. The DACA program allows for people who were brought illegally to the United States at a young age to stay in the country for an extended period. Receivers of DACA, often called “Dreamers,” can stay for renewable two-year periods and remain free from deportation while gaining access to a work permit. Recipients are disqualified, and therefore subject to deportation, if they have felonies or serious misdemeanors.
The recipients are eligible for home loans, but only through specific mortgage programs. Fortunately, these programs are generous in their terms and allow for the financing of many fantastic homes.
Mortgage Loans for Dreamers: There are Options!
Conventional loans
Currently, the only mortgage loans for dreamers are through Fannie Mae and Freddie Mac. These two government-supported corporations basically purchase loans on the secondary market; it’s in a lender’s interest to have the loans purchased by one of these companies, as it takes risk off of their portfolio. However, Fannie Mae and Freddie Mac only purchase loans that meet their specific guidelines, including guidelines related to the loan total, downpayments, and other factors.
With this loan program, Dreamers can actually purchase a home with as little as 3% down up to the conforming loan limit. Loan limits were recently increased, so Dreamers have the chance to purchase an excellent home that fits their needs for size, neighborhood, and amenities. If the loan is at high-balance conforming loan limits, the requirements may be 5% down, so you’ll need to check with your lending agent to see which one fits your needs and for which you may be able to qualify.
FHA loans, which are used for many purchases across the country, are not available for Dreamers. However, thanks to support from Fannie Mae and Freddie Mac, mortgage loans for Dreamers are possible, even if FHA loans, USDA loans, and other types of financing are not available at this time.
You might assume that these loans would come with more restrictions and stronger requirements, but they are actually quite generous in their overall terms. As you’ll see, they have low downpayment requirements, and qualifying for the conventional loan may be easier than you thought…
Gifts Funds are Acceptable
While 3% down is a relatively low number, the truth is that many people may be unable to afford even this small amount. That’s understandable, as the cost of living can be high, and if you have been paying rent throughout the years, saving the few thousand dollars for a downpayment can be tough. Even if your home is lower on the market price, this can equal thousands of dollars. For example, if you are purchasing a home worth $200,000 (which is certainly low in many California markets and other regions), a 3% downpayment equals $6,000. You may not have this amount readily available.
But with this program, you can actually use gift funds to support the purchase. If a qualifying family member gives you a generous financial gift, you can use this towards your purchase. Using a gift for your downpayment and mortgage fees is not always an option, as lenders often prefer that borrowers generate this money themselves. Essentially, someone who saved for a downpayment has demonstrated their reliability and financial responsibility, so gift funds are sometimes not allowed.
Fortunately, that is not an issue here. If you have received a cash gift from a specific family member, you can use it for your downpayment!
No Reserve Requirements
In addition to a downpayment, lenders often require financial reserves. Essentially, borrowers using certain loans (especially jumbo loans, but others as well), will need to keep a certain amount in savings. Usually this amount is equal to a specific number of monthly payments. For example, a lender may require that you have six month’s worth of payments in an account; if the monthly payment is $2,000, you would need $12,000 in cash reserves. ($2,000 x 6 = $12,000.)
However, this program does not require any reserves. You won’t have to generate a downpayment and cash reserves, which makes using the program far more attainable for many Dreamers.
Multiple Borrowers are an Option
Some borrowers, including Dreamers, may have trouble qualifying for a mortgage on their own. Perhaps their income is too low to qualify for the specific loan size; perhaps their credit score is not quite high enough for the specific loan type. There can be many reasons for not being approved, but there is one solution that could solve all the problems: multiple borrowers.
Multiple borrowers are allowed on these mortgage loans for Dreamers, and even non-occupying co-borrowers can be utilized. So if you have a parent or family member who could co-sign on the loan, that person does not necessarily have to live in the house.
Work with a Team that Can Handle All of Your Mortgage Needs
At San Diego Purchase Loans, we are proud to support the American dream of homeownership for all people, including DACA recipients. Mortgage loans for Dreamers are a reality, so contact our staff today and let us help you find the right mortgage for you needs and budget.
Our team is fluent in Spanish, so we can make sure you understand all the loan options and requirements, allowing you to make the right decision for you financial future.
Cross Country Mortgage and the Chad Baker team offer this program to DACA Dreamers with zero overlays, meaning qualification is easy and convenient! Don’t hesitate; start your path to complete homeownership by contacting our team today!
