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FHA Offers First-Time Homebuyers Discounted Loans for Taking Class

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By Kimberly Miller

homeownership_class(MCT)—Home loans are about to go on the discount rack for first-time buyers willing to spend a few hours learning the ropes of homeownership, from applying for a mortgage to choosing a contractor for a kitchen remodel.

The Homeowners Armed with Knowledge program, or HAWK, was announced by the Federal Housing Administration last month as a way for homebuyers to cut their mortgage insurance premium costs by attending housing counseling classes. The idea is that the more borrowers understand about homeownership, the less likely they are to default on their loans, reducing the risk for FHA.

After two years with no delinquent payments, the homeowner qualifies for another discount.

Borrowers who take the classes, which include several courses before and after closing, can save an average of $325 a year, or nearly $10,000 over the life of the loan.

“It may not seem like it, but $10,000 is a lot of savings for a $30,000-a-year household,” said Kimber White, state government affairs chairman for the Florida Association of Mortgage Professionals. “It can make the difference between qualifying or not qualifying to buy a home.”

A public comment period on the program will end in mid-August, and White believes borrowers will be able to begin applying by year’s end.

FHA doesn’t write loans, it insures them, and typically targets underserved populations. Borrowers can get an FHA-backed loan with as little as a 3.5 percent down payment and a credit score of 560. Conventional loans can require 20 percent down and a minimum credit score of 620, White said.

Credit scores from the Fair Isaac Corporation, or FICO, range from 300 to 850. The average FICO credit score in Florida is about 635, according to a survey by CreditKarma.com of its customers.

“Most people who are buying a home don’t know anything,” White said. “They have a little bit of money in the bank and a decent credit score and want a house.”

Under the program, borrowers who take the housing counseling class before signing a contract to buy a home, and who complete additional counseling before finalizing the sale, can earn a 50 basis-point reduction in upfront mortgage insurance and a 10 basis-point reduction in the annual premium cost. Upfront mortgage insurance premiums are 1.75 percent of the total loan amount, while annual monthly premium costs are 1.35 percent.

An additional 15 basis-point reduction will be awarded after two years with no delinquencies.
“If you talk about the long-term impact and how much it will save homeowners, this will absolutely help,” said Kevin Maher, who teaches first-time homebuyer classes and is the community outreach director for West Palm Beach, Fla.-based DebtHelper.com. “I think this will bring more people to the homebuyer classes, which will help them make better decisions.”

The classes will be taught by agencies approved by the U.S. Department of Housing and Urban Development. To find housing counseling agencies in your area, go to HUD.gov.

©2014 The Palm Beach Post (West Palm Beach, Fla.)
Distributed by
MCT Information Services

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6 thoughts on “FHA Offers First-Time Homebuyers Discounted Loans for Taking Class”

  • Anita Pulido says:

    1. May any lender doing FHA financing offer the class or do they HAVE to go to a Housing Counselor office?
    2. If they have already signed a contract when this comes into play, but have not closed yet, may they qualify for “additional PMI discount?”

    1. I to need to know if a client can go this if they have already signed a offer to purchase contract but is now just getting into the loan process and is there any classes in central southern Indiana area and is there a charge to the clients?

  • Larry Askins says:

    If I have first time home buyers whom I am working with are they eligible for this program with me still being able to be the buyer’s agent?

    thanks,

    Larry Askins

  • Nancy DiPasqua says:

    Are there any programs for first time homebuyers who purchased in the beginning of the year and didn’t have this program offered to them to reduce their PMI?

    Thanks,
    Nancy DiPasqua
    Jesse Turner Realty, Inc.

  • Tara Robertson says:

    I have a real estate agent that wants to send out flyers with my name on it and mention this program…… When exactly will the classes and the program start to be offered?

  • Suzanne De Vita says:

    Thank you all for your comments. The administrators of the HAWK program have outlined some FAQ, which respond to many of your questions:

    http://portal.hud.gov/hudportal/documents/huddoc?id=OHC_HAWKFAQ052114.pdf

    Thank you for making RIS your go-to source for real estate news!

    Wishing you continued success,

    Suzanne De Vita
    Online Associate Editor
    RISMedia, Publisher of Real Estate magazine

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