As you start the home buying process, it’s fairly common to begin researching available homes through the internet and to understand how much buying power you may have through mortgage pre-qualification. We suggest adding one more invaluable component, investing your time in Pre-Purchase Coaching, provided by a certified coach from a U.S. Department of Housing and Urban Development (HUD) approved, non-profit housing counseling agency. Whether you are a new home seeker or an experienced home buyer, pre-purchasing coaching is packed with essential information to prepare and guide you towards a successful home-buying experience.
No matter what your home buying experience level is, has been or where you are in the process, buying a home is likely to be the single largest purchase you’ll make in your lifetime. Therefore, being as prepared and informed through pre-purchase coaching and education at the onset will serve you well. Even if you’re just starting to think about the home buying process, it’s a great idea.
Here are some of the things you can learn from your time with a pre-purchase coach:
- Analyze how much you can truly afford to borrow
- Review your credit reports and fully understand them
- Qualifying criteria for a mortgage loan
- Learn the key terms and conditions of a mortgage loan
- Prepare financially for the purchase process
- Effectively shopping for a home
- Understand the roles of everyone involved in the process:
- Real estate agents
- Loan processors
- Mortgage brokers
- Learn the full types of costs that come with homeownership
- Learn about financial programs available to help you
- Know how to maintain and improve your new home
- Make your payments and avoid falling into foreclosure
There are a number of other education areas around the home buying process as well:
First-Time Home Buyer Education
The first-time home-buyer education is great for new homeowners, but also helpful people returning to homeownership after spending time renting. The home buying process is complicated, and new laws and disclosure requirements have changed the process over the years. This education comes in the form of first-time home buyer workshops and/or online classes. These workshops and online classes are approved by HUD, and course graduates get a certificate that can help qualify eligible borrowers for special mortgage-related benefits, like reduced mortgage rates or assistance with down payments and closing costs.
Mistakenly, many people wait to take in the education course toward the end of their process in order to get the certificate they need to qualify for a mortgage assistance program. These people get help, however, most that go through it wish they would have completed it at the beginning of their home buying journey versus the typical last step of their home buying journey.
Most of the course material covers pre-purchase activity: preparing for homeownership, understanding your credit, getting financing for your home, and shopping for the right property. The course also covers how to protect your investment and maintain the property after you own it, but the bulk of the course is about the steps prior to the home purchase.
A one-on-one pre-purchase coaching session includes a personal financial and mortgage readiness assessment, so you know whether homeownership is truly a good idea for you and what you can afford.
You’ll also cover assistance programs you may be eligible for, and get a certificate of completion. This coaching meets the requirements of the Home Ownership and Equity Protection Act (HOEPA), which mandates counseling for certain kinds of loans.
The goal of HOEPA is to protect homeowners who could end up losing their equity when refinancing or getting a second mortgage. A big part of this is avoiding predatory lending and unscrupulous lenders who seek to capitalize off of the inexperience of the typical homeowner. Pre-purchase coaching can help to protect homeowners from becoming victims.
Anyone eligible for a Federal Housing Administration (FHA)/HUD reverse mortgage must get counseling before the reverse mortgage is granted. This is a special product that has a lot of unique features, so counseling is a crucial way to ensure that one is making the right decision.
To get a reverse mortgage, the homeowner must be 62 years old or older, and own the house outright or have a low loan balance. The lender pays the homeowner monthly, and the homeowner no longer has to make any mortgage payments.
Typically, when the homeowner passes away, the lender becomes the owner of the house. If the house is worth more than that amount, your estate will get to keep any equity left over. You or your estate never owe more than the house is worth. If you sell or move out of the home early, then the reverse mortgage funds must be repaid to the lender.
Getting Pre-Purchase Coaching
Whether you need a pre-purchase education workshop, reverse mortgage counseling, or pre-purchase coaching, visit homeownership.org to get started.
One of the most crucial things you’ll get is access to an independent, nonprofit professional, so you can ask questions about anything that is unclear. Because the process of buying a home and getting a mortgage is so involved, this access is invaluable.
Another thing to bear in mind that as a representative of a HUD-approved nonprofit counseling agency, your housing coach has no financial stake in what kind of loan you get, how much you borrow, where you buy, etc. This is a truly independent service designed solely to educate you and ensure your success as a home buyer.