Home Buying 101

Classes for Prospective Buyers: Educating Consumers to Reduce Mortgage Defaults

The way Tim Monzello sees it, buying your first home is a lot like being a new parent.

“You’re going into both experiences blind,” said Monzello, 34, who recently moved into his first home in Azusa and has an 8-year-old son. “You’re hungry for any information that will make you a better home buyer or parent,” he added.

Before they bought their three-bedroom, $130,000 home, Tim and his wife, Karen, gathered all the information they could on what they consider the most important purchase they’ll ever make. A critical part of their research included attending classes for new home buyers.

What Are Homebuyer Classes?

Homebuyer classes, typically given by mortgage lenders, real estate agents, and nonprofit groups, are held throughout Southern California and across the United States. These classes are designed to educate consumers about the home-buying process and the responsibilities of homeownership, with the goal of reducing mortgage defaults.

Class Features

  • Offered by mortgage lenders, real estate agents, and nonprofit organizations.
  • Classes range from 4 to 8 hours in length.
  • Sessions are typically held on Saturdays or evenings, with some home study options available.
  • Often mandatory for qualifying for loans requiring 5% down or less.
  • Financial incentives such as down payment or closing cost assistance may be offered.

Attendees must understand how to:

  • Shop for a home.
  • Obtain a mortgage.
  • Handle the responsibilities of homeownership.

History of Homebuyer Classes

The concept of homebuyer classes was introduced in 1989 when Fannie Mae aimed to make homeownership more accessible to low- and moderate-income renters. The initiative partnered with several mortgage insurance companies, including GE Capital Mortgage Insurance Corp.

“In return for educating consumers about homeownership, we felt we could be more flexible in terms of underwriting guidelines,” said Mike Kachel, spokesman for GE Capital.

Since 1990, these classes have been available nationally, benefiting over 300,000 families. In the Los Angeles area alone, homes worth $3.3 billion have been sold to low- and moderate-income buyers in the last five years.

The Monzellos’ Experience

Tim and Karen Monzello attended their first home-buyers class after being referred by their real estate agent, Jim Malone. The classes helped them simplify what would otherwise have been a confusing and daunting process.

“We had talked to people about buying a home, but until we went to our first home-buying seminar and got an idea of what was really involved, it was a nebulous process in our minds,” said Tim Monzello.

During the class, experts discussed:

  • Qualifying for a loan, including affordability, down payments, income requirements, and credit impact.
  • The loan process, including terms like appraisal, escrow, and closing.

Breaking Myths About Homebuying

Some of the common myths dispelled in homebuyer seminars include:

  • Myth 1: A large down payment is required to buy a home.
  • Myth 2: You need perfect credit to qualify for a mortgage.

Credit and Financial Guidance

In addition to the myths about down payments and credit, participants learn about the role of credit in home buying. A major topic of interest is understanding how credit reports are evaluated by lenders.

“The most popular part of the class is often the credit session,” said Carmen Luna, community development officer at Chase Manhattan Mortgage Corp. “People are ignorant about how much credit you must have to buy a home and how lenders look at credit.”

Additional Benefits of Homebuyer Classes

Beyond credit education, the classes also cover:

  • How to address mistakes on credit reports.
  • Legal rights to explain negative credit comments.
  • Guidance on budgeting and how to save for a home.

Case Study: Chris’ Journey to Homeownership

Chris, a participant in a Mission Viejo home-buyers session, appreciated the detailed breakdown of the home-buying process, including:

  • The definition of “escrow”.
  • Understanding closing statements to avoid unnecessary fees.

Through budgeting and guidance from programs like CCCS, Chris is now close to achieving her dream of homeownership.

Conclusion: How Classes Help New Homebuyers

For prospective homebuyers like the Monzellos, these classes helped transform a daunting process into a more understandable and manageable journey. With careful planning, education, and the right guidance, homeownership becomes a more achievable goal.

For information on new home buyers classes in your area, call Consumer Credit Counseling Service at (800) 388-2227 or Fannie Mae’s HomePath hotline at (800) 732-6643.

Julie Bawden-Davis

Julie Bawden-Davis is a bestselling journalist, novelist, blogger, and YouTuber. A prolific author, Julie writes in several genres. She enjoys creating page-turning suspense served up with a dose of romance, garden books that turn any brown thumb green, and spiritual books meant to enlighten and inspire. Widely published, Julie has written 45 books and more than 4,000 articles for a wide variety of national and international publications. She lives in Southern California, where she enjoys sunny, blue skies most days and year-round gardening. Julie gains inspiration from being surrounded by plants when she writes.