Housing Counseling for First-Time Home Buyers
In cases where down payment assistance is concerned, this counseling is usually required to make sure the applicant fully understands their responsibilities for the loan. That includes why escrow may be required, and payment of property taxes and other expenses related to the home loan.
And some applicants are required to attend some form of housing counseling as a condition of loan approval.
What Is Housing Counseling?
Housing counseling is a tool consumers should use to become more familiar with the mortgage process. It can help you make informed decisions about loan choices and other issues. Housing counseling agencies may or may not be HUD-approved. You can call the FHA directly to be referred to an agency that meets HUD guidelines (see below).
There are multiple types of counseling. In general, one type may apply more than the others when you want a certain type of mortgage loan. Did you know that a certain type of counseling is required when applying for an FHA Reverse Mortgage, also known as a Home Equity Conversion Mortgage or FHA HECM for short?
That counseling is required to make certain all applicants fully understand their rights and responsibilities when approved for an FHA HECM. For example, those who don’t use the home which secures the HECM loan as their full-time residence risk having the Reverse Mortgage declared due in full.
That’s the sort of issue housing counseling is designed to inform you about (in the context of that loan product).
The importance of the counseling has a lot to do with the fact that your loan officer is not likely to have the time to fully explain your rights and obligations as defined in the purchase agreement.
At least not line-by-line. That is why all borrowers are encouraged to read the fine print of the contract. Housing counseling can help you better understand what those obligations are.
Then there is the kind of housing counseling that is optional. The FHA and HUD offer a free referral service you can use to find a local, HUD-approved housing counselor who can give advice and information that will help you in the planning stages of your new loan and beyond.
Housing counseling isn’t a requirement for all loans, but if you are a first-time borrower or a returning borrower who hasn’t applied for a mortgage in a long time? It may be smart to consider making an appointment. Call the FHA at their toll-free number, 1-800 CALL FHA to get your referral to a local, HUD-approved agency.
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