July 3, 2015
We often write posts that encourage borrowers to examine their pre-purchase counseling options before starting on the journey to apply for an FHA mortgage loan. We also write posts for eligible Home Equity Conversion Mortgage (HECM) loan applicants discussing HECM loan counseling. Some borrowers might wonder what the difference is between the two.
There are some obvious differences. HECM loans are a type of refinancing loan for eligible borrowers aged 62 and older that requires no monthly payments and comes due when the borrower dies or sells the home. FHA single family home “purchase loans” are for borrowers looking to buy a home with an FHA guaranteed mortgage. So up front, many of the concerns a borrower has with a new purchase loan differ greatly than those for any refinance loan, but especially HECM loans.
But the big difference we’re exploring with this post is the fact that FHA pre-purchase counseling is entirely voluntary and up to the borrower to request and schedule. HECM loan counseling is a mandatory part of the loan process for Home Equity Conversion Mortgages and the HECM loan is available only after the borrower(s) have received their counseling.
That may sound to some like the HECM loan counseling is more crucial than the pre-purchase counseling, since HECM loan counseling is mandatory. But in reality, the borrower who chooses to get pre-purchase counseling is doing a very important thing–making the most informed choices possible prior to committing to the home loan.
Pre-purchase home loan counseling is available simply by calling the FHA at their toll-free number, 1-800 CALL FHA, and requesting it. The FHA will refer you to a HUD-approved housing counselor in or near your local area and you can get a lot of good advice in a number of critical areas including pre-purchase budgeting, planning for the expenses of a home loan, how to shop for the house you want and much more.
Some view pre-purchase home loan counseling the same way they view a home inspection; both are optional but should not be overlooked as a crucial part of being or becoming ready to buy a home.
Do you have questions about FHA loans or refinance loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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