PRE-PURCHASE HOUSING COUNSELING AND HOUSING COUNSELING, IN GENERAL, DO NOT ONLY BENEFIT PROSPECTIVE HOMEBUYERS, BUT IT ALSO BENEFITS LENDERS AS WELL. think they need to put more down than lenders require, access to credit at reasonable rates to purchase a home can be a real hindrance for many, and the high levels of home price appreciation reduce home affordability making it more difficult for communities of color and first-time homebuyers to become homeowners. Here is what we know. Homeownership has long been the primary asset-building mechanism in the U.S. economy. Unfortunately, a century of redlining, mortgage loan discrimina22 MORTGAGE BANKER | JANUARY 2021
tion, and preferential housing subsidies have created major barriers to homeownership for black Americans and communities of color. Black homeownership rates have declined to levels not seen since the 1960s. What this means is that a large and growing homeownership gap corresponds with the wealth gap. Understanding the relationship between wealth accumulation and homeownership shines a spotlight on the importance of leveraging those resources to level the playing field for all prospective homeowners. When utilized, HUD-certified pre-purchase counseling is the resource that serves this critical need. This is particularly true now given the situation brought about by the onset of COVID-19. Although it may seem counter-intuitive, despite the financial turmoil currently occurring in the market place, for any buyer who has the financial means, an appropriate down payment, stable income, good credit, and looking to purchase an affordable property, now can be an ideal time to purchase a home. Feedback from counseling agencies from around the country indicates there are numerous “hot markets” evidenced by significant home buying activity across many income levels including the LMI segment.
ROBUST RESPONSE
This activity would likely be even more robust if more consumers took advantage of pre-purchase housing counseling. As was mentioned previously, some consumers don’t know housing counseling exists. Additionally, many consumers could either
qualify for a mortgage right now or would be qualifiable in a relatively short time if they just took the time to invest in themselves and their financial future by taking advantage of pre-purchase counseling. Here is the best part. Pre-purchase housing counseling and housing counseling, in general, do not only benefit prospective homebuyers, but it also benefits lenders as well. For example, through its Envisioning Homeownership Pre-purchase Counseling Program, the NFCC is working to create a pipeline of informed prospective homeowners that understand the home buying process, have realistic expectations of how much house they can afford, and have had their financials reviewed and organized to allow for more efficient underwriting by the lender. Driving this process is a dedicated coach who walks consumers through extensive counseling that assesses their credit scores, maximum qualifying ratios, and residual income as methods for verifying consumer mortgage readiness. As part of the counseling process, each counselor develops a customized action plan for their client that addresses credit, savings, and debt management challenges. This comprehensive review enables clients to become adequately prepared for successful, long-term homeownership. Ultimately, the knowledge gained through participation in the counseling process can create a more qualified borrower and a more financially resilient homeowner.
