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The views in this article are those of the author and may not reflect the opinions of Quicken Loans and its team members. 

Homeownership advisors are an untapped resource able to prepare today’s homebuyers for sustainable ownership. Immigrants working to save money and build their credit; millennials hungry for timely, relevant and reliable advice; seniors trying to decide whether to rent or buy as they downsize – everyone can benefit.

“This educational approach is important in supporting borrowers in getting prepared, making choices that are right for them, and sustaining homeownership for the long run,” says Anne McCulloch, Fannie Mae’s senior vice president for credit and housing access.

Case in Point

Pre-purchase or homebuyer education is available through HUD-approved nonprofit housing counseling agencies. These agencies help buyers – sometimes for a fee, usually less than $200 – decide the right time to buy, develop budgets, strengthen credit, find down payment assistance and get prepared for the challenges of owning a home.

“Some clients will ask us to just review their loan documents and go on their way. While others work with us longer term because they have multiple credit issues and may not be ready to buy,” explains Simone Griffin, vice president of Affiliate Relations at HomeFree-USA. “We offer value to every homebuyer,” she adds.

And it works. A study of the two-year loan performance of more than 18,000 pre-purchase counseling clients from NeighborWorks America’s network found clients who received counseling were one-third less likely to become 90 or more days delinquent in the two years since obtaining their loan when compared to similar borrowers who did not receive pre-purchase counseling.

Road to Homeownership

The mortgage industry is starting to recognize that value. When Fannie Mae introduced its 3% down HomeReady mortgage in 2015, it required borrowers to take a $75 online education course provided by Framework Homeownership. Nearly 70,000 homebuyers from all 50 states have completed the course to date – 40,000 of them in 2016.

“One of the most common remarks we’d hear from customers is ‘I wish I’d taken the course earlier in the process,’’’ says Danielle Samalin, president of Framework. To create that connection, Framework 2.0, which launched in July, provides ongoing education and support for “graduates,” notes Samalin.

But some buyers will want more assistance than they can get from an online course.

Fannie Mae recently announced an enhancement to HomeReady that will become effective before the end of the year so that if a borrower completes one-on-one counseling from a HUD-approved agency before signing a home purchase contract, the lender can receive a $500 credit for that loan.

“These borrowers have gone through counseling that includes a thorough review of their budget and credit, so we have more confidence they can sustain that level of debt to income ratio (DTI),” says McCulloch. “We think this change opens the doors to homeownership for some borrowers who were unable to qualify in the past based on their DTI. It’s a plan B. They can complete counseling, and move into homeownership when they are ready,” she adds.

Quality education for homebuyers and homeowners is central to Fannie Mae’s affordable lending strategy “because when someone buys a home they can afford, that they’ll live in for decades, we all win,” says McCulloch.

Laura Haverty is an author of three nonfiction books and journalist who spent more than 25 years in the publishing industry. As Fannie Mae’s editor in chief, she covers housing industry news and trends. Follow Fannie Mae on Twitter, Facebook and LinkedIn.

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