Buying - Get smart about buying

Have you been thinking about that dream house, with no idea of how to actually own it? Perhaps you should go back to school.

That's what 38-year-old Martha Herrick did - she attended a home-buying class. It started years ago, when she promised her mother that she would own her own home someday. Then her husband left her with bad credit and four small children. She spent years dreaming until a realtor referred her to the Neighborhood Housing Services Pheonix, a branch of NeighborWorks, a nonprofit organization dedicated to increasing home ownership.

At NHS Phoenix, she took an eight-hour course that taught her everything from creating a household budget to handling the closing process. A credit counselor showed her ways to clean up her credit report and how to apply for a loan with a competitive interest rate. Within five months, Herrick had a mortgage and a three-bedroom home with a large yard for her children to play.

Most first-time homebuyers find themselves overwhelmed and intimidated by the process of purchasing a home. Soaring home prices and mortgage rates have led many buyers to be confused when, where and what they should purchase. The mortgage interest adds to the confusion by continuing to offer new types of mortgages to choose from. The stakes are high - a mortgage is a long term, large debt. Seeking help from a profession is a good way to weed through all of the options.

There are many home-counseling programs geared towards low and moderate income families, even if you aren't in this income range, you shouldn't dismiss their services. Given the type of investment involved, almost everyone benefits from home-buying education.

Studies actually show that consumers who meet with housing counselors and seek education have higher success rates as homeowners. One study looked at 40,000 mortgages under Freddie Mac's Affordable Gold program. Those who received individual counseling had a 34% lower delinquency rate than those who didn't.

Finding help

Where do you find a good housing counselor or educational program? You can look towards nonprofit organizations, such as NeighborWorks, although many lenders and insurers offer counseling services. You can go to the HUD Web site to find a list of local home-buying programs in your area. You can also contact your state or county housing finance agency. Many church groups, credit unions and employers provide services with local counselors.

You should be able to find a free or low cost eight to ten hour class that explains the entire home-buying process. It will include how you application is viewed to the differences in different types of loans, such as interest-only and fixed-rate mortgages.

Don't forget, there is more to buying a home than just the financing. The classes and counselors will cover the importance of home inspections and other basic budgeting, including how much to save for home maintenance.

An added benefit of meeting with a housing counselor is that he or she can determine if you qualify for any special down payment assistance programs. While many are limited to those with low to moderate income, there are exceptions. There are some areas that are trying to revitalize that might waive income limits entire. If you don't have time for a full class, it can pay to simply make a phone call to see what programs are available for you.