Homebuyer Education Helps You Find the Right Home and Home Loan

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It's not that buying a house is complicatedd. It's not. It's basically a three-step process. That's part of the problem. It appears to be so simple we can lose sight of the fact that things can go wrong. Before we look at those steps, let's talk about why understanding them is so important. A house is probably the single biggest purchase any of us will make. As a result, the mortgage we take out is likely to be the largest debt and the longest-lasting loan contract we will ever sign. It could last 30 years.

For most of us, the mortgage payment is the most important one we make every month. If we fall behind, it's the hardest one to catch up with because of the size of the payment. It also is fair to say that losing a house through foreclosure is devastating to most families. It leaves a negative mark on your credit record that will stay there for years, and it can make it difficult to find a place to rent, let alone buy another home.

The fact is home buying education is not so much about how to buy a house as it is about how not to buy a house. It's learning what not to do, and, even more important, what to do when things go wrong. Here are the three steps you must take: 1) find the house that you and your family want to buy, 2) negotiate a mutually agreeable price with the owner, 3) pay for the house.

This is the overview. There are a number of free buyer-education courses you can take and counselors with whom you can talk. You can find a list of home buying counseling agencies approved by the Department of Housing and Urban Development. Fannie Mae also offers counseling and education through its Homepath Program. Go to http://www.fanniemae.com/ and type Homepath into the search engine. Freddie Mac's Homebuyer Education Program is at http://freddiemac.com/homebuyers/. You can also go to Ginnie Mae, which is involved in government-backed mortgages, such as VA loans, at http://www.ginniemae.gov and click on Your Path to Homeownership. Let's look at each of the three steps in a little more detail.

Step one is not as simple as it appears. The factors that make a house " desirable" range from location and appearance to size and price. The key factor, however, is price. There are homes you can afford—based on your income, expenses, and debts—and then there are homes that you can afford but are unwilling to buy. Most lenders and/or real estate agents will help you figure out how much you can afford—but they do so according to their standards. You can do the same on your own at our website at http://www.interest.com/. Once you are there, scroll to the bottom left-hand side and click on mortgage calculators. You'll find easy-to-operate calculators that will help you determine how much you can borrow, and how much you would have to make to buy a particular house. You will find similar calculators on other websites. The advantage of doing the calculations yourself is that it puts you in charge from the very beginning. You can determine the price range you can afford.

Just because you can afford something doesn't mean that you either have to or want to pay that much for a home. Some people look for the most expensive house they can afford, and they are willing to stretch their finances to the limit. They are confident that their job is secure, their income will go up, and there will be no unexpected major expenses. Others are wiser. They would rather buy a less expensive house and have more of a financial cushion in case of home repairs, medical problems, lay-offs, or any of the other financial surprises that can leave a family on the brink of foreclosure or bankruptcy.

Step two, negotiating the price, is actually the easiest of the three. You know how much you are either able or willing to pay, and the sellers know how much they want or are willing to accept. You just keep making offers and counter-offers until you find a number you can both agree on—or until the deal falls apart because you cannot find that number. In that case, you find another house and start the process again.

Step three is both the simplest and most complicated. You can pay for your home with cash, a loan, or a combination of the two. If you pay in cash, there is no problem. When problems develop it's usually because of the loan—and your ability to make the required monthly payments. This is also the step on which homebuyer education programs and counseling agencies focus. Some people end up in a mortgage mess because they bought a house that was too expensive. Others get there because of a lost job, a medial problem, or a divorce--three of the biggest reasons for major mortgage dilemmas.

Any homebuyer education course you take will help you be a better-educated homebuyer--someone who is less likely to get into trouble. As an added bonus, the various programs mentioned would help you understand the kinds of problems that can arise, and the steps you can take to avoid them. In many ways, taking a homebuyer education course is a lot like reading the instruction manual before setting up a new computer. You do not have to do it. But the home buying process will move more quickly and smoothly if you do, and you might uncover some things you would have otherwise overlooked.