The first sign something was amiss popped up about an hour in. My husband and I were taking a first-time home buyer class, and the woman leading the session had just finished rehearsing the advantages of buying rather than renting: pride of ownership, tax benefits, building wealth.
Next, I assumed, we would discuss the disadvantages — being locked in to a mortgage, repair costs, lack of mobility — but that never happened. We took a break, grabbed some doughnuts and coffee from the back of the room, and moved onto budgeting.
I began to worry.
The goal of first-time home buyer education is to untangle the complicated knot of paperwork and procedure that can make buying a house a daunting prospect. Regional housing agencies or economic development organizations run the classes with the aim of encouraging homeownership and making sure buyers have the tools they need to succeed as a homeowner.
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“They really want to make sure people are making educated choices and are ready to purchase a home and are not going to become a foreclosure statistic in the future,” said Karen Wiener, deputy director of Citizens’ Housing and Planning Association, an affordable housing nonprofit in Boston.
Consumers who complete the classes are rewarded with access to lower-interest loans and, in many communities, assistance with down payments. To claim these benefits, buyers generally must complete a class approved by the national affordable housing organization NeighborWorks or the Massachusetts Homeownership Collaborative, a state homeownership initiative that issues a standard curriculum and code of ethics.
But not all classes are created equal.
How, then, are aspiring homeowners to sort out questionable advice from reliable information? To determine if their class is usefully informative or dangerously misguided?
Keep an eye open for red flags like the ones we noticed:
Follow the leader: Pay attention to the people leading the sessions and how they talk about their roles in the real estate industry. The main educator should be someone who will not benefit financially from the actions of the students — such as a real estate agent or mortgage broker. Guest speakers from within the industry are allowed but should remain impartial.
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“They can’t sell themselves,” Wiener said.
In the class we attended, approximately half the instruction was led by a mortgage lender who repeatedly pointed out the difficulties home buyers can run into and the ways his company, specifically, is set up to conquer these obstacles. The guest speakers also sang his praises, some even explicitly pointing out the advantages of working with him.
Cash concerns: Buying a house is the biggest financial move most of us will ever make and deserves careful and nuanced consideration. So watch out for instructors who make financial recommendations that seem brash, absolute, or vague.
The mortgage lender who led our session made some statements that triggered our alarm bells. He told us, for example, “I don’t see any other option [than buying].” Later, he twice mentioned that it is possible to withdraw money from retirement savings to use toward a down payment, a move that is generally discouraged by financial planners. He made only a passing reference to potential drawbacks and did not elaborate.
Details, details, details: A home purchase is not just costly — it can also be complex. A good home buyer class will give you the details you need to sort through the process, from budgeting and shopping for a mortgage to homeowner’s insurance and basic home repair responsibilities. For this reason, the Massachusetts Homeowner Collaborative has created a curriculum that outlines the topics that must be covered.
Watch out for a class that skirts — or downright omits — the details. Our instructors used terms like “equity” and “earnest money” without ever explaining what they meant. We were given a workbook containing extensive financial planning worksheets and sample legal documents but did not go over them in either session.
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Instructors encouraged us all to learn our credit score but did not tell us how to do so. When asked the best way to obtain this information, the mortgage lender still failed to answer; he did, however, say that the score is worth paying for, even though there is a growing number of free credit score options available.
Many credit card companies offer credit scores to their customers — the numbers can usually be found by signing into your online account. Independent services such as myBankrate and Credit Karma provide free credit scores based on data from major credit reporting agencies (though you might have to put up with some promotional e-mails after signing up).
None of this is to discourage aspiring homeowners from taking one of these classes. Many — perhaps most — are full of useful, unbiased information.
But if you notice any of these warning signs in a class you attend, do not hesitate to contact the agency sponsoring the course, as well as NeighborWorks, the Massachusetts Housing Collaborative, or whatever organization has approved the course.
Perhaps most essential, aspiring home buyers should look at any class not as a comprehensive source of home-buying information but as a jumping-off point. Use your new knowledge to do your own homework: Talk to lenders, real estate agents, lawyers, and financial planners to ensure you are making the best decision for yourself — not for the real estate industry.
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Sarah Shemkus can be reached at seshemkus@gmail.com.