Homebuyer education courses: when you need one

Many loans and assistance programs for buying a home require a “homebuyer education course” before closing. This guide is for you if you were asked to take one or want to prepare: it explains what it is, how it differs from counseling, when it is required, where to take it for free or in Spanish and what to do with the certificate. All of it based on what HUD, Fannie Mae, Freddie Mac and the programs themselves say.

Of the 134 assistance programs in our database require a homebuyer course

65

Borrower, at least, must finish the course before closing when Fannie Mae requires it

1⁴

Freddie Mac's CreditSmart Homebuyer U, with lessons in Spanish

Free⁵

What a homebuyer course is

A homebuyer education coursehomebuyer education courseA homebuyer education course is a class with a set curriculum that covers the homebuying process, how to maintain a home, budgeting and why good credit matters. It can be in a group, in person, online or by phone. It is not the same as housing counseling, which is one-on-one help with an action plan for your situation. Some loans and some down payment assistance programs require you to finish a course before closing, especially first-time homebuyers. When you finish, you get a certificate.See the full definitionClose is a class, not a one-on-one appointment. HUD’s rule calls it “education”: formal classes with a curriculum and goals, in a group or classroom, on topics such as the homebuying process, how to maintain a home, budgeting, fair housing, how to recognize and report predatory lending and the importance of good credit.¹ Fannie Mae defines it the same way and adds that it can also be given in other formats.⁴

Counseling is something else: help from a counselor for your particular situation, focused on specific obstacles such as repairing your credit or finding money for a down payment, and always with an action plan.¹ For Fannie Mae, counseling includes a budget and a written action plan, plus an education component.⁴

Course or counseling

Education

Homebuyer course

• A class with a curriculum, in a group, a classroom or other formats.¹⁴
• General topics: buying, budgeting, credit, maintenance.¹
• It ends with a certificate your lender keeps.⁴

One-on-one help

Housing counseling

• A counselor reviews your particular situation.¹
• It includes a budget and a written action plan.⁴
• For Fannie Mae, it also meets the course requirement if it comes from a HUD-approved agency.⁴

If you are asked for a course and also want help with your numbers, counseling gives you both.⁴¹⁰

When you are asked for one

It depends on your loan and your program. On loans Fannie Mae buys, at least one borrower must finish the education before closing in these cases: if no borrower has at least one credit or installment account on their report; if, in a manually underwritten loan, no one has a credit score; on a HomeReady purchase when everyone who will live in the home is a first-time buyer; or on a purchase with a loan-to-value ratioloan-to-value ratio (LTV)The loan-to-value ratio (LTV) compares the amount of your mortgage with the appraised value of the property. It is expressed as a percentage: a loan that covers almost the whole value has a high LTV; one with a large down payment, a low LTV. Lenders use it to measure risk: the higher the LTV, the stricter the requirements and the more likely you will be asked for mortgage insurance. Over time, as you pay down principal or the home gains value, your LTV falls, which can let you cancel PMI on a conventional loan.See the full definitionClose above 95% when all borrowers are first-time buyers.⁴

Freddie Mac has an education requirement for its Home Possible and HomeOne mortgages, and says the certificate from its free CreditSmart Homebuyer U course meets it.⁵

Many down payment assistancedown payment assistance (DPA)Down payment assistance (DPA) is money a public or nonprofit program contributes toward your down payment and sometimes your closing costs. Many states, local governments and nonprofits offer programs to make homeownership more affordable; most focus on low- and moderate-income families buying their first home, and some target teachers, firefighters and other public service employees. The help can be a grant you never repay, a second loan with no payments that is forgiven over the years or repaid when you sell, and many can be used with a regular FHA or conventional loan.See the full definitionClose programs also require one. Of the 134 programs in our database, 65 say in their official source that they require a course. Two examples: the Texas agency (TDHCA) says completing an approved course is required to qualify for its program’s assistance,⁷ and the Connecticut agency (CHFA) requires one of its workshops for anyone getting a CHFA loan.⁸ The which programs do I qualify for tool finds programs for you, and each program’s page under assistance programs says whether it requires a course.

If this is you

Everyone is a first-time buyer

With Fannie Mae, if the loan-to-value ratio is above 95% or the loan is HomeReady, someone must take the course before closing.⁴

No one has a credit history

Fannie Mae requires the course if no borrower has a credit account on their report.⁴ See also credit from zero.

You prefer to learn in Spanish

CreditSmart Homebuyer U has lessons in Spanish; the printable certificate is in English.⁶

You cannot pay for a course

There are free courses, and a HUD-approved agency that charges must serve people who cannot pay at no cost.⁵³

Where to take it

You have three common routes, and all three can work; what matters is that your lender or program accepts the course.

A HUD-approved counseling agency. Some give homebuyer workshops. By rule, agencies that give group sessions must also offer individual counseling on the same topics.² The CFPB says not every counselor offers every service, so check each agency’s list of services.¹⁰ The guide to HUD-approved housing counselors explains how to find one who speaks Spanish.

Your state housing agency’s course. Some agencies have their own. Connecticut’s, for example, says its workshops are free, that HUD-approved counselors give them on weekday evenings and Saturdays, that some agencies hold them virtually and some in Spanish, and that you get a certificate when you finish.⁸

An online course. Freddie Mac’s CreditSmart Homebuyer U is free, online and self-paced: you can pause and continue on several devices, lessons are in English and Spanish, and the certificate can be sent to your lender and your co-borrower. The printable certificate is in English.⁶

For Fannie Mae loans, any qualified third-party provider independent of the lender can give the course, in person, online, by phone or hybrid, with content aligned with national or HUD standards. The lender confirms the course and keeps a copy of your certificate.⁴

HUD-approved counseling agencies by state

State	HUD-approved counselors
Alabama	25
Alaska	1
Arizona	21
Arkansas	14
California	81
Colorado	26
Connecticut	13
Delaware	12
District of Columbia	17
Florida	98
Georgia	42
Hawaii	17
Idaho	10
Illinois	81
Indiana	21
Iowa	11
Kansas	3
Kentucky	19
Louisiana	26
Maine	7
Maryland	41
Massachusetts	37
Michigan	59
Minnesota	33
Mississippi	16
Missouri	18
Montana	11
Nebraska	8
Nevada	8
New Hampshire	5
New Jersey	34
New Mexico	7
New York	93
North Carolina	52
North Dakota	3
Ohio	54
Oklahoma	6
Oregon	25
Pennsylvania	75
Puerto Rico	9
Rhode Island	5
South Carolina	13
South Dakota	13
Tennessee	32
Texas	51
Utah	7
Vermont	7
Virginia	49
Washington	15
West Virginia	8
Wisconsin	26
Wyoming	1

Some give homebuyer workshops; check each agency's services.¹⁰ Source: HUD

What it costs

There are no-cost options. Freddie Mac says CreditSmart resources are completely free,⁵ and the Connecticut agency offers its workshops for free.⁸

HUD-approved agencies may charge reasonable and customary fees for education and counseling, as long as the cost does not cause you financial hardship. They must post their fees, tell you before providing the service and cannot charge you for intake. If they charge, they must provide counseling at no cost to people who cannot afford it.³ The CFPB sums it up: these agencies give independent advice, often at little or no cost.¹⁰

What you learn

These are the topics the sources describe. According to HUD, education covers the homebuying process, maintaining a home, budgeting, fair housing, identifying predatory lending and the importance of credit.¹ CreditSmart Homebuyer U, for example, goes from an introduction to the homebuying process to managing money, credit, getting a mortgage, finding a home and closing, and keeping your home.⁶

Homeownership counseling, when you ask for it, covers the whole process: the decision to buy, choosing and buying a home, the inspection and what comes after.² If you want the numbers side, the guide on how to buy a home step by step follows the same order.

From the course to closing, step by step

From the course to your certificate in the loan file

1. 1. Ask which course they accept

   Before you enroll

   Your lender confirms the course is aligned with the standards; your program may require its own.⁴

2. 2. Pick the format

   In person, online or by phone

   For Fannie Mae, in person, online, by phone or hybrid all count.⁴

3. 3. Take the course at your pace

   Well before closing

   With CreditSmart you can pause and pick up where you left off.⁶

4. 4. Keep the certificate

   When you finish

   The certificate of completion is what meets the requirement.⁸

   Try it with your numbersDocument checklist

5. 5. Give it to your lender

   Before closing

   The lender keeps a copy in your loan file.⁴

6. 6. If you want more help, ask for counseling

   Any time

   A HUD-approved agency helps you with your budget and an action plan.⁴

The certificate: your proof that you finished

What meets the requirement is not having attended the class, but the certificate of completion. On Fannie Mae loans, the lender keeps a copy in your file.⁴ CreditSmart Homebuyer U can send the certificate to your lender, your housing professional and your co-borrower, and the printable certificate is in English.⁶ In Connecticut, those who finish the workshop receive a certificate that meets the requirement of their CHFA loan.⁸ There, one of the workshops is not needed if you took the other within the past 12 months, and the pre-purchase workshop is free for anyone who lives in the state.⁸

Keep the certificate on paper and digitally, with the date you finished. If your purchase is delayed, ask your lender or program whether the certificate is still good or whether you need to repeat the course.

Questions to ask before you enroll

Before you pay or spend hours on a course, it helps to have these answers. HUD-approved agencies must tell you their fees before providing the service.³

• Do my lender and my assistance program accept this course?
• How much does it cost and what does that price include?
• Is it in person, online or by phone? Are there classes or materials in Spanish?
• How long does it take and can I do it at my own pace?
• How and when do I get the certificate? Do you send it straight to my lender?
• How long is the certificate valid?
• Do you also offer one-on-one counseling if I need it later?

Common mistakes

• Mistake: Taking any course without asking whether it is accepted.

  Instead: Ask your lender or program; the content must be aligned with the standards.⁴

• Mistake: Taking CreditSmart Essentials thinking it is the homebuyer course.

  Instead: The one that gives the certificate for buying is CreditSmart Homebuyer U.⁵

• Mistake: Leaving the course for the last week.

  Instead: When it is required, it must be finished before closing.⁴

• Mistake: Paying without asking the price.

  Instead: HUD-approved agencies must tell you their fees before the service.³

• Mistake: Losing the certificate.

  Instead: Keep it on paper and digitally; the lender needs a copy.⁴

The CFPB notes that many states and local organizations help first-time buyers, and that a HUD-approved counseling agency or the HOPE Hotline, (888) 995-4673, can help you find those programs.⁹ If you will use a Mortgage Credit Certificate or down payment assistance, ask whether they require a course from the start.

What to do this week

1. Ask your lender or assistance program whether they require a course and which one they accept.⁴
2. Find programs with the which programs do I qualify for tool and check on each program’s page whether it requires a course.⁷
3. If you prefer online and in Spanish, look at CreditSmart Homebuyer U, which is free.⁶
4. If you prefer in person, look for a HUD-approved agency and ask about its workshops and fees.³
5. Keep your certificate and give it to your lender before closing.⁴