Some homebuyers may save big with homeownership education

Partaking in homeownership education may help you qualify for discounts and assistance when purchasing your home.

Some homebuyers may save big with homeownership education

In a press release dated Tuesday, May 13, 2014, the Federal Housing Administration (FHA) gave information in regard to its “Blueprint for Access,” outlining the additional steps the agency is taking to expand access to credit for underserved borrowers. According to the Housing and Urban Development (HUD), the steps include encouraging a broader use of housing counseling. The specific pilot program is called the Homeowners Armed with Knowledge (HAWK). Under the proposed plan, new homebuyers who commit to housing counseling would qualify for savings on their FHA-insured loans of up to $325 a year – or nearly $9,800 over the life of their loan.

Shaun Donovan, Secretary, U.S. Department of Housing and Urban Development said, “We want to create an environment that encourages responsible behavior and provides clear rules of the road so lenders can originate loans without fear of unanticipated consequences. We want lenders to be able to focus on the quality of their processes and lend to all qualified borrowers.”

According to research cited by the “Blueprint for Access,” delinquency rates for borrowers who have received counseling are 29 percent lower for first-time homebuyers and 15 percent lower overall. Despite the statistics, homeownership counseling is not required even for first-time buyers unless the purchasers are taking advantage of special loan products. A program that requires Homeownership counseling is the Michigan State Housing Development Authority (MSHDA) down payment assistance program.

However, the HAWK pilot plan would use incentives instead of requirements. For example, the FHA proposes that homeowners who complete housing counseling before signing a contract to purchase a home and who complete additional pre-closing housing counseling will receive a 50 basis point reduction in the upfront FHA mortgage insurance premium (MIP) and a 10 basis point reduction in the annual FHA MIP. There are even more incentives for choosing to participate in post-closing counseling and keeping a good track record. A basis point is a very small percentage, but as stated before, the savings over time can be in the thousands of dollars over the life time of the typical mortgage.

The HAWK program is only in the comment stage as HUD will publish a notice in the Federal Register, but the FHA is clearly taking steps to encourage a broader use of homeownership counseling. According to FHA Commissioner, Carol Galante, “Our blueprint to expand credit access outlines the steps we are taking over the next few months to make that happen. These programs transform the way we do business, make us a better partner, and help reduce risk across the market.”

As the correlation between successful homeownership and education continues to be observed, homeowners, especially first-time homebuyers will need access to education. The MSHDA and HUD websites contain lists of certified counseling agencies. In addition, there are Michigan State University Extension Finance and Homeownership educators located throughout the state of Michigan who are certified in homeownership counseling. You can visit MI Money Health to find out more information and find a certified homeownership counselor or program being offered in your area.

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