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Cover story: Classes help homebuyers avoid errors

- - Thursday, September 20, 2012

Whether you are a highly educated, experienced investor or a young professional eager to become the first homeowner in your family, a homeowner education class can be an invaluable resource.

While Realtors and lenders often team up to present short homebuyer seminars that can provide useful information, those sessions typically are geared toward someone who is almost ready to buy a home and is looking for a real estate professional and/or lender for advice.

Homebuyer education classes, on the other hand, last from two to eight or even 20 hours and are more comprehensive. They generally are offered by nonprofit organizations or government programs that are considered neutral parties in the home-buying process. In most cases, the classes are free.

"Everyone needs pre-purchase education, even people who have graduated from Harvard Law School," said Marian Siegel, executive director of Housing Counseling Services in the District. "People who receive in-depth homeownership training are not the ones you see now facing foreclosure.

"Too often, even people who are highly educated lose sight of the financial situation when they fall in love with a tree in bloom in the backyard or the hardwood floors in a home. Homeownership education can help people learn from other people's mistakes."

Ms. Siegel recommended that prospective buyers find a homebuyer education program approved by the Department of Housing and Urban Development before looking for a Realtor or a lender and before looking for a home to buy.

"Everyone has their hand in your pocket during the home-buying process, from the lender to the Realtor to the appraiser to the home inspector to the title company," Ms. Siegel said. "If you work with a HUD-approved nonprofit housing-counseling agency, you can get help from a truly disconnected voice. There's no economic value to these agencies in your buying a home or not, so we are truly neutral."

While some homeownership classes are mandatory for applicants for down-payment assistance or a low-interest mortgage program financed by a state or local government, these classes are available to anyone regardless of their income level or the type of financing they intend to obtain.

"Anyone can come to the classes offered by the Virginia Housing Development Authority," said Kelly Gill-Gordon, homeownership education manager for VHDA. "We offer eight hours of classes on either two evenings or all day on Saturday, and we also offer our entire course online."

Ms. Gill-Gordon said that while the curriculum is the same for the online classes and the in-person classes, she thinks taking the course in person offers a better opportunity for participants to ask individualized questions. The class schedule and locations are available on the VHDA website.

"We have qualified trainers to teach the classes on personal finance, credit issues, working with a lender, working with a Realtor, preparing for settlement and working with a home inspector," Ms. Gill-Gordon said.

At HomeFree-USA in Hyattsville, a variety of educational classes are offered, along with peer-group support sessions and one-on-one counseling sessions.

"We offer a 'Homeownership for All' class that helps people who are thinking of buying a home wherever they are in the process," said Marcia Griffin, CEO of HomeFree-USA. "We think it's important to take this class first so that you know what lenders are looking for when you apply for a loan. Every buyer needs coaching from someone who is objective and who can answer questions."

Ms. Griffin said government-supported down-payment assistance and loan programs require eight hours of homebuyer education, but she said she thinks 15 hours is even better because buyers will get more comprehensive information. Potential buyers can find a list of free classes on the HomeFree USA website.

At Housing Counseling Services, free homebuyer classes are held on a walk-in basis without a preregistration requirement every Tuesday from 11 a.m. to 1 p.m. and every Wednesday from 6 to 8 p.m. in both Spanish and English.

"This two-hour pre-purchase class teaches people about budgeting, credit and savings; about the home-buying process; and about what steps to take next," Ms. Siegel said. "The class helps people triage themselves into different groups for free one-on-one counseling if they want it. Some people need more help with money and credit issues, others are almost ready to buy but want some additional counseling, and a third group is ready to go out and buy a home."

An eight-hour homebuyer course is available at Housing Counseling Services for buyers applying for government-backed down-payment assistance and loan programs. This course includes information about how to choose a lender and a Realtor, loan terms and loan options, the importance of a home inspection, and skills that can assist people once they become homeowners.

"Good homeownership training is about helping you develop good consumer skills, such as comparing offers, rooting out predators and choosing the right professionals to work with," Ms. Siegel said.

Some of the information participants learn from homeownership education classes, Ms. Griffin said, is how to avoid making small mistakes that can have an impact on their credit score.

"One of our most important classes is 'How to Save When There's No Money Left.'" Ms. Griffin said. "Everyone needs a savings and spending plan, but we can also offer one-on-one counseling for people who need more help. We also offer tips on how to become debt-free for life and how to change your spending habits."

At VHDA classes, students learn how to read their credit report and why their credit score is so important, Ms. Gill-Gordon said.

"We walk people through the entire loan-application process and talk about how important it is to work with a Realtor," she said. "We go over the buyer-broker agreement so that buyers understand how that contract works. In our section on home inspections, ideally taught by a home inspector, we explain why the inspection is so important and teach people about the importance of home maintenance."

Students at the VHDA classes also are given a manual with sample copies of all the documents they will see at their closing so they are prepared and understand them.

"It's actually a really great investment of your time to take eight hours to learn as much as you can before you make such a big financial decision," Ms. Gill-Gordon said. "It's so important to know which questions to ask, to set your expectations appropriately and to truly understand what's affordable so that you can enjoy the long-term benefits of homeownership."

Homebuyer education resources

District -- Housing Counseling Services, www.housingetc.org/, 202/667-7007

Maryland -- HomeFree USA, www.HomeFreeUSA.org, 301/891/8400

Virginia -- Virginia Housing Development Authority, www.vhda.com, 804/782-1986 or 877/VHDA-123