Shopping for a prospective home is one thing, shopping for mortgage loans is another. Ahead is an exciting, albeit challenging task of looking for a loan to buy that dream home. An empowering tool that first-time homebuyers can use to help them navigate the process of owning and buying a home is a homebuyer education course.
Pre-Purchase Homebuyer Education
A homebuyer education course serves as an introduction to mortgages, homebuying, and homeownership, helping you understand the processes and set your expectations as a mortgage borrower. The end-result should be getting the best mortgage deal possible. »Click here to get matched with a lender»
To that end, some lenders require borrowers to complete a homeownership course before they become eligible for a loan. And if you avail of down payment assistance, you may be required to attend homebuyer classes as well.
Homeownership classes are offered by agencies and/or nonprofit organizations for free or for a small fee. They may be online or in-person classes that can be completed in hours to a full day, as applicable.
While attending a homeownership course is not compulsory, a homeownership education course does impart valuable concepts to first-time homebuyers, helping them understand the following and more.
Credit and Its Role
Your credit score will determine if you qualify for a loan or what your loan terms will be. And if you’re aiming for a lower interest rate, your credit score will be a primary deciding factor. Homeownership classes drive this point and ways to improve on or fix credit by paying off debts, reporting any errors on credit reports, etc.
Can You Afford It
How much can you afford? Your borrowing power relies on how much (i) you can put as down payment and (ii) the lender is willing to let you borrow, as well as your credit standing.
Another consideration is, “Can you afford to buy a house at this point?” If you add up your renting costs versus the costs associated with the mortgage, moving and settling down, which is higher?
(True) Cost of the Loan
This leads to another point that down payments are just one aspect of the loan. You have to consider the appraisal fees, title fees, closing costs, real estate taxes and insurance premiums, monthly mortgage payments, settling costs, and home maintenance costs.
Closing the loan itself is an important step in the mortgage process that a borrower should have a clear picture of. While this is in no way to dissuade you from getting a mortgage, being aware of the true costs of the loan can help you prepare better.
Considering Home Inspection
Although not exactly required by lenders, a home inspection readies you for possible repairs needed to be done in the house. You can negotiate with the seller on how to go about with the repair costs if any.
A homeownership class will touch on the basics of home inspection and why it’s a good idea to do it at your own expense. To be clear, a home inspection differs from a home appraisal, which is required by mortgage companies to protect their interests.
Consulting with Professionals
A homeownership course will walk you through the process of working with real estate agents to find a home, schedule site visits, and make an offer. You may also need to meet with housing counselors and other professionals that will be involved in your home purchase.
Choosing the Best Loan
The focus of any homebuyer education course is to guide first-time homebuyers, repeat buyers too, so they can come up with an informed decision when choosing mortgages that would work for them.
Each lender offers varying loan programs at varying interest rates. It’s best to keep your options open, look around, shop and compare rates.
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Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.