Buying a Home is Hard. It’s Even More Difficult When You’re Undocumented.

Several times throughout the home-buying process, Jorge wanted to throw in the towel. The journey of owning a home was longer and more complicated than he imagined. 

He was buried under a mountain of paperwork and endless requests for financial statements and records. Qualifying for a loan became progressively overwhelming, especially when juggling work and other responsibilities. “I was starting to regret it,” Jorge said. “I got tired.”

But his wife encouraged him to continue working with the lender. And earlier this month, he received the keys to his new home.

The long, windy path to homeownership began more than two years ago for Jorge’s family. He first seriously considered buying a home when he realized rent was becoming increasingly unaffordable in Pilsen — a historic port of entry for immigrants that has grappled with rising rents, increasing home prices, and skyrocketing property taxes. Back in 2022, he reached out to a local community development organization, the Resurrection Project, to learn how to buy his first home. 

From workshops and meetings, he discovered the complexities of the home-buying process and how expensive it can be, especially for people like him who are undocumented. Borderless is only using Jorge’s first name because of his immigration status. 

Undocumented immigrants can buy a house, but their immigration status poses unique challenges. Noncitizens face limited financing options and stricter lending requirements, with some ITIN home loans requiring a minimum 20% down payment and sometimes interest rates as high as 10 percent. However, some local lenders and homebuying counselors suggest that more financing opportunities are becoming available for noncitizens in Greater Chicago. These options are opening the door to homeownership for a population often overlooked by lenders. 

Decades of limited finance options for noncitizens 

For decades, noncitizens have faced a narrow path to homeownership. 

Lizette Carretero, the director of financial wellness at the Resurrection Project, said there are limited finance options for Taxpayer Identification Number (ITIN) holders or noncitizens who can’t get a social security number. 

For about a decade, she only referred her noncitizen clients to one lender, Self-Help Federal Credit Union. That is because the lender was among the only ones Carretero knew offered home loans to ITIN holders. 

According to a February report by the Urban Institute, lenders face challenges in offering mortgage products to noncitizens, and very few offer them as they are niche products. Among these challenges is that ITIN loans don’t generally qualify for backing from a secondary market. Government-sponsored enterprises such as Fannie Mae and Freddie Mac generally don’t buy ITIN loans, and the Federal Housing Administration won’t insure mortgages if the borrower can’t prove legal U.S. residency. 

Jorge, who worked with a counselor at the Resurrection Project, took out a loan with 7.6 % interest. “I don’t know if that is a lot or a little,” said Torres. 

This is low for home loans for ITIN holders, but it is becoming more common for Carretero’s clients. 

In the past, Carretero had been helping her clients acquire loans with a 20% down payment and interest rates of upwards of 10%. However, in recent years, she’s learned of more home loan options for ITIN holders to refer her clients to.

Some local financial institutions in different parts of the country are interested in adapting to the market. According to Amalie Zinn, one of the authors of the Urban Institute study, lenders who offer ITIN home loan products say there is more demand than is currently being served. The ones based in communities with a large Latino population, especially the credit unions, told Zinn that serving noncitizens gives them more credibility in their communities.

Gabriela Roman, a loan originator at Devon Bank, said she has received interest from loan officers at small and large lenders inquiring about their ITIN loan product. They want to understand what it might look like to offer such a product. She said low delinquency rates — the percentage of loans with past-due payments — make it an attractive option despite the challenges.

A 2016 pilot of ITIN lending by the Filene Research Institute showed low delinquency rates and high demand for ITIN-holder lending products. 

Despite a gradual expansion of finance options and growing interest from lenders, noncitizens still face several barriers, especially navigating credit scores and other financial practices common in buying homes. 

When Jorge immigrated from Mexico to Chicago more than two decades ago, he made it his mission to pay off family debt back home. 

A few years after arriving, he married his wife, and they later became a family of four. During that time, he worked two full-time restaurant jobs. He had no car payments, no credit cards, and no extra bills like cable that he felt were unnecessary. Jorge thought avoiding debt, paying his bills on time and saving would show that he was a responsible candidate to be trusted with a mortgage, but it was more complicated than he expected.

“In this country, you have to have debt and pay off that debt to have a credit score, and that’s what [the Resurrection Project] taught me,” Jorge said. “Now I have a good credit score.”

Still, most conventional mortgages require a social security number to verify identity and run a credit score, but undocumented immigrants do not have one. Many also try to avoid debt, and some like to keep their cash at home, said Brenda Zamudio of Devon Bank, a bank that serves  Cook and Lake County and offers home loan products to ITIN holders.

Josefina started looking into buying a home in April. Like Jorge, she had no idea she needed a credit score. She was also surprised to learn that even if she does qualify for a home loan, the interest would be higher, and the down payment would be larger than it would be for a conventional loan that someone with social security could be eligible for. 

Josefina, who is undocumented from Mexico, hopes to be able to buy a house within a couple of years and move out of her small two-bedroom apartment on Chicago’s South Side. She is working on building her credit but is keeping her mind open to not buying if the process isn’t worth it for her.

“We were shocked,” said Josefina. “It was a bit overwhelming.” 

A gradual expansion of home loans for ITIN holders 

Across the U.S., an estimated 5,000 to 6,000 ITIN mortgages were made in 2023, but this could be up to 73,000 to 88,000 if these market barriers were removed, according to the Urban Institute study. 

Researchers found that with the majority of ITIN holders being Latino, some lenders and community development organizations across the country see opportunities to access an untapped and underserved market. A 2021 study showed that the rapid growth of the Latino population is poised to drive nearly 70 % of net ownership gains through 2040. 

Carreterro said that about 40% of The Resurrection Project clients looking to buy a home are undocumented. This year, the organization launched its own home loan for ITIN holders to offer mortgage products accessible to undocumented immigrants. In February, the Resurrection Project made 10 loans available. Those loans have already been lent and they are working to offer more this year, said Carretero.

“We host homebuyer classes each month, so we essentially continuously build a pipeline of educated buyers,” she said. “In that process, we analyze their situation and try to pair them with a loan product that can fulfill the needs that they are looking for as far as qualifying for a home.”

Carreterro said the organization is working to raise more capital to offer more of these loans, which were made possible by partnering with Heartland Bank and Trust Company. The bank offers a loan that requires a 20% down payment, 17% of which the Resurrection Project provides, so the borrower only needs to contribute 3%. Borrowers must have a credit score of at least 640 and a low debt-to-income ratio.

The program is one part of a larger strategy by the nonprofit organization to support community development and combat gentrification. The organization also develops affordable housing rentals and supports families in homebuying and financial literacy. 

Other local lenders have also recently started offering home loan products for ITIN holders. Devon Bank began offering a home loan product for ITIN holders in 2019. They evaluate a client’s debt-to-income ratio instead of requiring a credit score. They initially required a 20 % down payment and had only a handful of borrowers in the first few years. After decreasing their down payment requirement to 10% in the spring of 2023, they saw an increase in the number of ITIN loans closed. Roman said they project closing about 20 of these loans by the end of this year, up from seven in 2013. Last December they also launched a refinancing loan for ITIN holders.

Zinn, a research analyst at the Urban Institute, said more data is needed to understand the scale of ITIN home lending. In interviews with lenders across the country, she found that while more financing opportunities are becoming available in some places, they are becoming more limited in others. In the last few years, the political landscape has made some lenders in some states perceive these loans as more risky due to changing immigration policy and politics. Amid fraught political discourse around immigration, some undocumented immigrants are unwilling to share their information with banks, she said.

Geovanni Costales, senior loan originator at Devon Bank, said that creating these home financing opportunities in Chicago can help ITIN holders take a significant step toward building generational wealth.

“Within five years, their situation could change,” said Costales. “They can either sell their property or refinance. If they become a citizen at that point, we can transition them to a path toward a conventional mortgage. The key point here is to let the client have access to the property, and that’s really what will drive wealth for that individual.”

Finally owning a home is opening opportunities like building generational wealth for undocumented folks like Jorge.

He stepped into his new home in early June. He has been slowly moving furniture and boxes full of clothes from an apartment in Pilsen to his new home with his wife and two children on Chicago’s South Side. Torres said the house was new construction, purchased for $275,000.

It wasn’t the house he was expecting. He hoped to stay in Pilsen and have a garage, but he considers himself lucky. 

Throughout the homebuying process, he didn’t think he could afford a house or even qualify for a loan in the first place. His counselor warned him it would be more difficult to buy a home and interest would be higher. Ultimately, his lender required a 10% down payment on his, but he obtained grants that lowered his out-of-pocket down payment to less than $6,000. 

“It is a country of opportunities, and when the opportunity arrives, you have to take advantage because you will not always have it,” he added.

The next major step for his new home is to build a garage soon.

This content was made possible by a grant from The Chicago Community Trust.