Homebuyer education courses: What are they and should you take one?

Many state homebuyer assistance programs and some mortgage lenders require borrowers to take a homebuyer education course — especially if they’re a first-time homebuyer. It’s a good idea to find out what educational opportunities are available to you — even if you aren’t obligated to complete a class — and learn about the homebuying process and homeownership before you purchase a house.

What is a homebuyer education course?

A homebuyer education course is an online or in-person class you can take to better understand what’s involved in finding, financing and owning a home. Your mortgage lender might require you to complete this course, or you might need to take it if you’re participating in a down payment assistance or other housing financing program run by a state housing authority (HFA).

“This class explains the homebuying process, what is needed from the borrower to be approved for a mortgage loan, the benefits of homeownership, the challenges of homeownership and mortgage and lending terms,” says Wil Hendrix-Griffin, senior vice president of Affordable Lending for PNC Bank in the Chicago area.

Sometimes, the course is offered as a pass/fail class, says Hendrix-Griffin, and the buyer usually receives a certificate upon completion. Other courses have a grading system, such as the homebuyer education class offered by Take Charge America, a Phoenix-based nonprofit credit counseling agency.

“In our course, attendees carefully review the content and their knowledge is periodically tested through a set of quizzes,” says Jeremy Wine, customer experience manager with the organization, which offers the class to buyers in all 50 states. “Those who receive a cumulative score of 70 percent or above will pass our course and receive a certificate of completion.”

What do you learn in a homebuyer education class?

A first-time homebuyer class aims to help you learn about the entire process of buying and owning a home to make sure you’re ready for the commitment.

You’ll learn about the different steps in the homebuying process, including how to:

• Make sure you’re ready for homeownership
• Save for a down payment and manage your finances
• Check your credit to make sure it’s sufficient to get a mortgage and improve your score if necessary
• Determine your budget for buying a property
• Find first-time and other homebuyer programs that can help you
• Compare different types of mortgages and lenders
• Choose the right lender
• Know what closing looks like
• Live in and maintain your new home

Each homebuyer education class is different, however, and depends on the organization offering it and the breadth of material it covers. There’s also a difference between attending a class in person versus taking one online.

“The best courses are in-person classes that allow for substantial interaction within the class and with the instructor,” says Tony Julianelle, CEO of Atlas Real Estate in Denver. “Ideally, the class should provide time for you to develop a household budget and work through various scenarios, such as how you might pay for a large repair if it were needed.”

Benefits of first-time homebuyer classes

You’ll walk away from a first-time homebuyer class with the knowledge you need to buy a house. Beyond obtaining that key information, a class might be a requirement for a more affordable mortgage, which could look like:

• A low-down payment loan;
• Down payment and closing cost assistance or grants;
• A lower mortgage rate; or
• A combination of the three

These benefits (as part of a first-time buyer loan program) can save you money on your mortgage and make homeownership less costly overall.

How to find homebuyer education courses

The U.S. Department of Housing and Urban Development is a great place to start, as it lists approved homeowner classes. You can also consult with your real estate agent or lender for help. Some of the ways you can take courses include:

• On demand: Online homeowner classes allow you to access the source material and take any required tests when convenient. They also offer the same information quality as in-person classes.
• Local: Many Realtors and lenders offer first-time buyer certification classes. That said, if you’re looking to qualify for a grant or loan, you’ll need to make sure the class meets your lender’s requirements.
• Low cost: Homebuyer courses range from free to up to $125 or more, which includes all materials you’ll need to complete the course. Even better, some programs will credit the amount you spend on a homebuyer education course to your closing costs. Just make sure it’s on HUD’s list of approved courses.

FAQ about homebuyer education courses

• How much does a homebuyer education course cost?

  Many homebuyer education courses charge a small fee that you have to pay for out of pocket, and they can typically cost up to $125. Some classes that are offered free of charge might be funded by your lender, real estate agent, HUD or the organization offering the course. Fannie Mae also facilitates a free first-time homeownership course that meets the education requirement for most loan programs.
  
  
  Julianelle says that a free class you find on your own might not be a HUD-certified course that meets the conditions of the lender or agency requiring you to take it. So, before enrolling in and completing a homebuyer education course, be sure to confirm that it is, in fact, a HUD-approved class.
  

• How long does a homebuyer education course take?

  Many homebuyer education courses are four to eight hours long; the free Fannie Mae course takes about three to four hours. You can usually complete a course in one or two days, either online through a website or app or at a brick-and-mortar location like your real estate agent’s or lender’s office, says Hendrix-Griffin.
  
  
  “Most courses offered online allow you to complete them at your own pace,” says Julianelle.
  

• Should you take a homebuyer education course?

  Even if a homebuyer education course isn’t required, completing one can still be a smart move. You’ll be empowered with more information about the homebuying process, and you can complete most classes relatively quickly and for a nominal cost or no cost at all.
  
  
  It’s best to complete a homebuyer education course as soon as possible, well before closing on your mortgage. “It’s a best practice to complete this education as soon as you’re aware you’ll need it so that you’re able to find a class that works in a short timeframe,” says Julianelle. “Classes fill up quickly at most HUD-certified courses.”
  
  
  Ultimately, while many first-time homebuyers successfully traverse the process without taking a class, it can’t hurt to explore.