What is homeownership education and counseling?
A third type of homeownership counseling -- foreclosure prevention counseling -- can be distinguished from other forms of post-purchase counseling in that it is responsive instead of proactive. It does not enter into action until a problem has or is about to develop. For more on this third type of homeownership counseling, see the Foreclosure Prevention summary.
Homeownership education and counseling programs, particularly pre-purchase counseling programs, are common in most communities, but many communities lack the resources to expand their reach.
How is homeownership education and counseling a tool for supporting housing choices?
People who attend pre-purchase education and counseling can also understand how to spot and avoid predatory lending practices. They can also learn how to improve their credit scores so they can qualify for more attractively priced mortgage products. A recent Center for Housing Policy study, Impacts of Homeownership Education and Counseling on Homebuyer Purchasing Power, found evidence that families who attend homeownership education and counseling can significantly increase their credit. By helping families qualify for safer, lower-priced mortgage products and entry cost assistance programs, a small investment in homeownership education and counseling can yield a large return in increased borrowing power.
Pre-purchase education may also help to reduce defaults and foreclosure. A study by Freddie Mac found that certain types of pre-purchase homeownership education and counseling significantly reduced mortgage default rates. The programs that worked best were classroom education and individual counseling, but not telephone education. 
Many of the classes are offered in multiple languages to accommodate people whose native language might not be English.
Continued homeownership education following the home purchase can also be helpful by preparing homeowners to better meet their ongoing home maintenance needs by budgeting for repairs. It can also reduce utility bills through weatherization and increased energy efficiency.
Consider the cost of transportation in home purchase decisions.
The Brookings Institution analyzed household costs and created an Affordability Index that used the Twin Cities as the model. In this report transportation is shown to be the second largest household cost. Nationally they found that transportation expenditures as a percentage of household costs range from less than 10 percent in transit-rich areas to nearly 25 percent in other areas.
A Transit for Livable Communities report states the average Twin Cities household spent 17 percent of its income on transportation. This is worrying enough but the report also showed that low income households spent substantially more. Households in major areas that have more extensive transit systems spent significantly less than the average. This is a lesson that should not be lost on policy makers and should be considered when making a housing purchase choice.
My Transportation Cost Calculator
My transportation calculator is an important part of homeowner education and will allow users to:
- Calculate the combined housing and transportation costs using household characteristics and location.
- Evaluate the factors that determine housing and transportation costs, and how changes impact expenses.
- Assess the true proportion of income being spent on housing and transportation.
- Compare actual household costs with neighborhood and regional averages.
- Evaluate the full costs of a new location before moving.
Where are these policies most applicable?
In Minnesota, many pre-purchase education and counseling programs are funded through the Home Ownership Education Counseling and Training fund (HECAT). HECAT is a competitive funding pool sponsored by Minnesota Housing, the Home Ownership Center, the Family Housing Fund, and the Greater Minnesota Housing Fund. The Home Ownership Center provides technical assistance, capacity building, and program oversight to ensure consistency and quality of homeownership education and encourage coordination and sharing of best practices among providers. The Center refers home buyers to programs based on geographic proximity and individual homeowner needs.
Many Minnesota communities and financial institutions require Home Stretch in order to obtain down payment assistance and first time homebuyer mortgage products.
Related Case Studies
Minnesota Home Ownership Center
The Minnesota Home Ownership Center leads a network of 50 agencies across the state...