Gambian-born Yama Jarju applied to join the Dudley housing register in December 2007 with a bogus French passport and a false claim to have lived there for 10 years , which would have given her the right of free movement as an EU national.
The 36-year-old was offered a property in Talbot Road, Netherton, with a reduced rent subsidised by Dudley Council in May 2009, a judge was told.
She moved in with her two children and mother, who died in 2012, but a tip off that the passport was fake triggered a local authority probe which ended in her arrest last year, Wolverhampton Crown Court heard.
Jarju claimed she arrived here in 2003 but the Home Office has no trace of her entering the country legally, revealed Mr Richard Franck, prosecuting.
She lives apart from the father of her children who does not support her financially.
The defendant was granted leave to remain in the UK for a further two and a half years in February but was not entitled to rely on public funds such as subsidised rent, continued the prosecutor.
The council believes she saved £26,623 by not having to pay the full private accommodation rent. She will now be served with an eviction order.
Jarju has a part time job in a nursing home and her two children, aged 11 and eight, are doing well at school, maintained Mr James Bryce, defending, who conceded: "She knew that if she declared the real situation to the local authority she would be homeless and could not afford to rent at the market rate.
"She is a hard working woman from a poor country on a low wage who continued the deception because she wanted to care for her children.
"She simply wants to do the best for the family. Her eldest son was head boy at his junior school but if she is sent to prison it will have a much worse effect on the boys than herself."
The defendant, currently still living with her children at the Talbot Road address, admitted fraud by false representation and was given a 10-month prison sentence suspended for 18 months.
Judge Dean Kershaw told her: "I do not know on what basis you came here but you have been given an opportunity in this country.
"Your position would have been seriously considered by the authorities if you had told the truth but you chose to act fraudulently."