Does Homebuyer Education Lead to Housing Stability?

Efforts to educate new homebuyers are paying off, according to HUD. This week, HUD published early findings from a large-scale study into the benefits of counseling buyers, The First-Time Homebuyer Education and Counseling Demonstration and found that distance and telephone counseling programs in mortgage literacy and preparedness, homebuyer outcomes, and loan performance are indeed helping borrowers make better choices to achieve housing and financial stability.

Between September 2013 and January of this year, HUD studied more than 5,800 prospective first-time homebuyers across 28 metro areas, as well as three large national lenders, 63 HUD-approved housing counseling agencies, and two remote service providers. According to the study, 65 percent of early participants (2,377 people) who were offered remote homebuyer education and counseling initiated services, versus just 25 percent of those who were offered in-person education and counseling.

HUD cited improved mortgage literacy, greater appreciation for communication with lenders, and improved underwriting qualifications among the positives. There was, however, no evidence of improved budgeting practices, i.e., buyers comparing a budget with their actual spending.

“The early findings of this study underscore the need to continue supporting housing education and counseling programs, and the particular importance of making remote education and telephone counseling easily accessible to prospective homebuyers” said Katherine O’Regan, HUD’s assistant secretary for policy development and research.  “Over the next four years, we expect to produce long-sought answers about the impact of homebuyer education and counseling on mortgage literacy and preparedness, homebuyer outcomes and loan performance.”

Education, HUD concluded, could be the main factor in moving prospects into actual buyers. In June, the Harvard Joint Center for Housing Studies issued its annual State of the Nation’s Housing report showing a continued decade-long downward trend in homeownership rates, while also noting that the vast majority of Americans indicate a preference for homeownership and that homeownership remains a key component of wealth building potential.

“Understanding the extent that education and counseling can facilitate homebuyer success at gaining and keeping a mortgage is critical to mapping the future homeownership strategy for America,” HUD stated.