Barriers to Latino Home Buying

Rising prices, scant savings, low incomes, complicated industry practices and cultural barriers are shutting many Latinos out of the housing market, according to a study released Tuesday by the Congressional Hispanic Caucus Institute.

The study, based on focus groups with consumers, real estate agents and advocates in 11 cities, including Los Angeles, is one of the broadest attempts to explain Latinos’ lagging rate of homeownership in America.

In 2004, 47% of Latino households owned their homes, compared with 68% of all households, according to the Department of Housing and Urban Development. In California, 43% of Latinos owned their homes in 2000, the most recent year for which state statistics were available.

“So many of our folks are ready for this, but the question is, ‘How do you make a connection?’ ” said Alejandro Becerra, a research fellow at the institute, a Washington-based organization specializing in Latino issues.

In many respects, the Latinos in the institute’s study fit the profile of other low- to middle-income city dwellers: They expressed a desire to own a home, but high rents, low incomes and tight housing markets kept them from buying.

“The Hispanic population is concentrated in some of the most expensive housing markets in the country,” said Henry G. Cisneros, a member of the institute’s National Housing Initiative who served as HUD secretary from 1993 to 1997 and now heads American CityVista, a company that builds housing in urban communities. “Rent is still a substantial part of their incomes.”

However, the study found a number of challenges for Latinos who were potential home buyers.

Consumers said they relied largely on word of mouth for information about how to build a credit history, fix bad credit or get help with a down payment. As a result, myths abound.

“One is that they can’t purchase a home without having really good credit, or they can’t purchase a home if they’re not here legally. Another is that they don’t understand that they can get a co-applicant to help them out. They don’t understand the system,” said Phil Lopez, a housing advocate at the Neighborhood Housing Services of the Inland Empire, a San Bernardino organization that aids first-time home buyers.

These misconceptions leave buyers vulnerable to predatory lenders, the study found.

“There are a lot of people who make a lot of promises -- low interest rates, no money out of pocket -- and then once you’re halfway through the process, you find out that’s not the case at all,” said David Benavides, a real estate agent in Santa Ana who works primarily with Latinos purchasing their first homes.

Anticipating a growing pool of potential buyers, most major lenders have designed loan programs for the Latino market. They offer lower interest rates, allow multiple co-signers and provide down-payment assistance. But more could be done, said Timothy Sandos, executive vice president at Citigroup Mortgage, such as working with community-based groups.

The institute’s study recommends that banks have more bilingual staff. It also favors the creation of a nationwide secondary market for mortgages sold to customers who do not have Social Security numbers.

Other cultural and economic barriers to homeownership exist, the study found. For many Latinos, saving for a down payment often takes a back seat to sending money to relatives outside the U.S. Latinos in the United States sent $31 billion to Latin American countries last year, according to the Inter-American Development Bank.

The study found that fear and skepticism about the banking industry often keep Latinos -- particularly those who have recently arrived in the United States or work here illegally -- from opening accounts and building a credit history. Many come from countries where banks are unstable, and many undocumented Latinos believe they cannot open a bank account without a Social Security number.

In fact, in many states, including California, banks are allowed to accept the matricula consular, an identification card issued by the Mexican government through its consulates in the United States. Many banks also accept taxpayer ID numbers as a valid form of identification.