Buying a home is a complicated process. It’s usually the biggest financial transaction of a person’slife, andoften involvestaking out a mortgageto pay for the new digs.
Paying offsuch a large debt is a serious commitment, but it’s not the only financial consideration. Saving up for adown payment, improving your credit score, making room in your budget for unforeseen expenses — it can take years to financially prepare for homeownership. So it’s no surprise that there’s a desire forguidance and education.
Many nonprofit credit counseling agencies offer counseling for homebuyers as one of their services. David Atkinson, certified financial counselor atConsumer Credit Counseling Service of Buffaloandmember of NerdWallet’s Ask an Advisor network, explainshow credit counseling can help with the homebuying process.What kind of credit counseling is available to homebuyers?
Credit counseling for homebuyers covers a number of topics, including:
- Budgeting: Establish a current budget and a budget for after your home purchase.
- Analyzing your credit report: Determine what steps you’ll need to take to get the best financing on your home.
- Selecting a home: Assess your income and financial obligations to determine what mortgage payment, and therefore which homes, you can afford.
- Financing a home:Learn what loan options are available and what the qualificationsare.
- Home maintenance and taxes: Plan to set aside money for taxes and maintenance costs.
Certain types of pre-purchase counseling might alsobe helpful onceyou own a home. For instance, delinquency housing counseling — which you can often receive for little to no cost — can help if you fall behind on your mortgage (more information on the HUD website). A housing counselor can also help with reverse mortgages, a type of home loan for homeowners age 62 or older that requires no monthly mortgage payment. Theycan help you understand the costs, eligibility requirements and steps involved in the process.
Fees for housing counseling, including homebuying counseling, typically range from $0 to $150.How does credit counseling aid the homebuying process?
A housing counselor is an unbiased advocate who can provide informationand tools. This, in combination with the information you may receive from a real estate agentor a mortgage sales representative, can help you make aninformed choice.
Counselors canhelp you calculate affordable mortgage paymentsand establish a budget that can accommodate home repairs and maintenance costs. Theymay also provide informationon different types of loans — including state and government loans like Veterans Affairs loans and Federal Housing Administration loans— and help you figure out which would be the best fit for you.
You might also receive informationaboutstate, federal or local grants for homebuyers. For instance, in Hamburg, New York, it’s possible to get a $10,000 town grant, while New York state has a first-time homebuyers grant of $7,500. Grants may have income requirements, or may be limited tofirst-time buyers or limited tospecific uses— closing costs and escrow or down payments, for instance. In some cases, buyers mustparticipate in housing counseling to qualify for grants.In what cases would you want to utilizethis type of credit counseling?
The main reason is to save thousands or even tens of thousands of dollars on your mortgage. So in that sense, most potential homeowners would benefit — and the sooner they work with a counselor, the better. I would advise most people to contact a housing counselor two or three years before they plan to purchase a home, to come up with a plan to improvetheircredit score and see ifthey can qualify for any grants.
It’s best to work with a real estate agentand mortgage sales professional in combination with a housing counselor, so youcan make the most informed choices possible when shopping for a home. Visit the National Foundation for Credit Counseling’s websiteto get a direct referral to a counseling agency in your area.
CCCS of Buffalois a nonprofit credit counseling agency andmember of the National Foundation for Credit Counseling.