Undocumented Immigrants Buy Into Home Owning Dream

August 18, 2004 (By Nurith C. Aizenman, WP) - Gerardo Cabrera fell in love with the house immediately. There was the bay window in the living room, the fireplace in the den, and -- most enchanting to a man raised amid the concrete of Mexico City -- the woods in the back yard.

And so the auto mechanic and his wife, a secretary, decided to pay $200,000 for their own piece of suburban Gaithersburg, a classic tale of immigrants achieving the American dream.

Except for one detail: At the time, they were in the United States illegally.

Undaunted, Cabrera went to three lenders until he found one who was willing to accept identification in place of a Social Security card. "I believe in thinking positively," said Cabrera, 38, who became a permanent legal resident about a year after buying the house in July 1999. "It doesn't matter how many times you're told no, because you only need one person to say yes."

Real estate agents and mortgage brokers say a substantial number of undocumented immigrants across the Washington region appear to be finding similar ways to buy their first homes -- their purchases just one more example of the extent to which the nation's estimated 9 million undocumented immigrants have become integrated in American society even as they remain outside the legal system.

"They are undocumented, but they are also working, paying taxes and planting roots," said Michael A. Stegman, a professor at the University of North Carolina who studies housing and immigration. Though statistics are not available to pinpoint the numbers, it stands to reason, he said, that "undocumented immigrants are potentially a very significant portion of the homeownership market."

That is not to say buying a home is a simple proposition for people without valid immigration papers. For one thing, while no law prohibits them from buying property, many are deterred by the same unfamiliarity or distrust of the banking system that often stymies legal immigrants. Raised in countries where banks may be seen as unstable, such immigrants often operate in a cash economy -- getting their wages in hard currency, storing their savings in boxes and jars at home, and paying for their purchases upfront rather than with credit cards.

When the time comes to apply for a loan, they have a hard time documenting their incomes and proving their creditworthiness. This is one reason that less than 50 percent of all immigrants own homes, compared with nearly 70 percent of native-born citizens, according to a study by the Fannie Mae Foundation.

In addition, undocumented immigrants are barred from obtaining loans that are federally insured or eligible for repurchase by government-established corporations such as Fannie Mae. These loans usually offer the lowest down payments and interest rates.

Instead, home buyers without visas must apply for loans that the lender generally carries on its own books rather than reselling -- and these loans are not easy to find at favorable rates.

Cabrera, who was admitted to the country on a tourist visa and stayed on to work months after it expired, was having no luck until a friend recommended that he contact Alma Preciado, a mortgage broker with Metropolitan Financial Services in Silver Spring. Silver Spring mortgage broker Alma Preciado works with lenders that don't require proof of legal immigration status but charge higher interest rates. Preciado found Cabrera a lender that would accept an "individual taxpayer identification number."

Issued by the Internal Revenue Service since the mid-1990s, these numbers are intended for people who are not eligible for a Social Security number but need to report income for tax purposes. They are easy to obtain, and many undocumented immigrants who do not want to compound their violation of immigration law by failing to pay taxes use their individual ID numbers to file tax returns each year.

Preciado said five or six customers per month -- about 10 percent of her mainly Hispanic clientele -- qualify using an taxpayer ID number rather than a Social Security number.

Although Cabrera's loan was legal, Preciado declined to identify the lender. However, she said it was one of two institutions she works with that accept the taxpayer ID numbers without also requiring proof of legal immigration status. In exchange, they do not necessarily require a larger down payment, Preciado said, but they may charge up to two points higher than the prevailing interest rate.

Cabrera didn't have to pay that much. He said he put down 15 percent of the sale price of his home -- about $30,000 that he had earned by selling his apartment in Mexico City -- and got a rate of 7 percent, roughly the average rate at the time.

However, other area mortgage brokers said they were not aware of lenders that could offer such attractive loans to borrowers without Social Security numbers. Instead, they require such clients to put down 20 percent to 30 percent of a home's sale price, often an insurmountable obstacle for people who tend to work low-wage jobs, said Patricia Castellanos, a mortgage broker with Weststar Mortgage in Woodbridge.

"When I tell them, they get so sad because they have saved enough money for maybe even 10 percent," Castellanos said, "but 20 percent is just too high."

Yet, she said, there are those who manage to scrape together the difference. "I had a customer who came to me a year ago, and I told him he didn't have enough," she recalled. "So he and his wife took three or four jobs each and saved everything they could. Last month, they bought a house."

Another option is to ask a family member or friend who does have legal status to apply for the loan. The illegal immigrant then gives the stand-in money each month to pay the mortgage.

Luis Chiliquinga , an Ecuadorean construction worker who was in Maryland on an expired tourist visa in January 2001, resisted that idea at first.

"I'm here working because this country needs us immigrants to do these jobs, but I can't put my own name on the loan? It just seemed unfair," said Chiliquinga, who has since obtained a green card.

But unable to afford more than a 5 percent down payment on the $150,000 town house he wanted to buy in Germantown, he decided his only choice was to ask his daughter, who had become a U.S. citizen through marriage, to apply on his behalf.

Real estate agents and mortgage brokers say it is hard to tell how many of their clients reach the same conclusion, because most don't tell. Still, the agents suspect a fair number of their clients are acting as proxy buyers for undocumented relatives.

"Sometimes it's really obvious because they all come into my office together: the brother and his wife and his kid, and I'll think, 'Hmm, that's a little strange,' " Castellanos said with a laugh.

Hugo Cruz, an agent with F. Richards Realty in Springfield, estimated that one of 10 sales he handles involves a stand-in.

Whatever the numbers, some advocates for stricter enforcement of immigration laws see an ominous sign in home buying by undocumented immigrants.

"If they're willing to buy a house, to dump their life savings into this kind of purchase, that suggests they don't think they have anything to fear from immigration authorities. And they're right," said Steven A. Camarota of the Center for Immigration Studies in Washington.

Kimberly Propeack, a lawyer with the immigrant rights group Casa de Maryland, sees a different message.

"I think it reveals that undocumented immigrants have an extraordinary commitment to their local communities," she said, "and we're just waiting for immigration law to catch up to that reality."

Staff researcher Margaret Smith contributed to this report.