Residential Magazine

Many Borrowers Need This Extra Oomph

Housing counselors can assist clients in purchasing a home and avoiding foreclosure

By Jean Ballard and Kathryn Williams

Housing counselors are trained, independent professionals who listen, offer advice and help people make informed decisions about the home purchase process based on an individual’s financial situation and needs. Counselors provide information and tools to consumers involved in homeownership or renting.

“When consumers use a housing counselor, they are more likely to obtain a mortgage and are less likely to default.”

Housing counselors prime borrowers for the costs of homeownership and help them retain their homes. Through either group or one-on-one sessions, counselors assist prospective buyers throughout the mortgage process, including the pre-application phase, the purchase search and the post-closing period.

Traditionally, housing counselors have played a particularly important role in helping borrowers avoid foreclosure by providing advice in default situations, but assistance is now growing in the pre-purchase space. Housing counselors are partnering with mortgage lenders and originators to help borrowers prepare for homeownership, creating home-ready clients who can work with lenders to fulfill their dream of homeownership.

Trained guidance

Housing counselors aid borrowers on a litany of issues, such as managing debt or improving credit, throughout the homebuying process. Counselors can connect consumers with key parties and give them the tools to become successful homeowners. Most importantly, housing counselors can help borrowers avoid foreclosure once they’re in a home.

On the pre-purchase side, housing counselors are trained to provide guidance on downpayment assistance programs and help the consumer understand the types of mortgages that are available. They help to build and maintain credit, and they also advise on the roles of the real estate agent and lender. They begin by getting an understanding of a client’s financial situation (including income, credit and debt) to best offer advice.

Their primary goals are to instill financial literacy; encourage budgeting and responsible financial behavior; provide information on the homebuying process; and prepare buyers for the unique maintenance challenges associated with owning a home. This information can help to promote the long-term sustainability of homeownership.

Counseling may be the best avenue for consumers who have been denied approval for a mortgage and require customized assistance. While there are many reasons that consumers would connect with a housing counselor, the two most common reasons are to find homebuyer assistance programs and to obtain help in qualifying for specific loan programs.

Inexperienced borrowers

Housing counselors are available to and used by people of all demographics, although they tend to be utilized more often by certain groups. African Americans, Hispanics, women and people from lower-income households tend to turn to a housing counselor more often than the general population.

The higher representation for these groups can be explained by their tendency to more frequently include first-time homebuyers or a limited family history of homeownership. This may also explain why these groups are more frequently subjected to predatory lending tactics.

While housing counselors have helped many consumers access homeownership, many Americans are unaware of these services. Additionally, the word “counseling” can provide a negative connotation to some people, as it indicates a problem that needs to be fixed and can be a deterrent to a consumer soliciting the services of a housing counselor.

Tangible value

Housing counselors play a key role for homeowners and renters alike, which is supported by studies that show the positive effects of using their services. The immediate positive effects of counseling are more responsible mortgage shopping and selection, better home maintenance, lower rates of loan default and more stabilized neighborhoods.

Another positive outcome of working with a housing counselor is support for groups who have historically had a harder time becoming homeowners. In general, counselors help to narrow homeownership gaps based on race, gender and income.

When looking at the tangible value that a housing counselor provides, buyers who receive guidance achieve significantly better loan performance than those who do not, all other factors being equal. Using delinquency rates as a primary measurement of loan performance, the Urban Institute’s 2001 study of mortgages originated through Freddie Mac’s affordable housing program found that individuals who received counseling were 19% less likely to have a 90-day delinquency, and they were 34% less likely to do so when they received one-on-one counseling.

A 2012 study from the U.S. Department of Housing and Urban Development (HUD) also showed that consumers who received pre- purchase counseling had better long-term outcomes. Furthermore, the earlier that counseling is started, the sooner people can do an affordability analysis and determine whether buying a home is the right option. A study released in 2013 through NeighborWorks, a nonprofit that supports community development programs, reported similar findings.


Housing counselors are an essential resource for many consumers during the home purchase and subsequent ownership processes. When consumers use a housing counselor, they are more likely to obtain a mortgage and are less likely to default. Additionally, historically disadvantaged communities are receiving assistance from counselors.

 In an ideal world, as consumer awareness expands on the benefits of housing counseling, anyone who wishes to consult with a counselor may do so. If you or a client wishes to find a housing counselor, visit the website of HUD’s Office of Housing Counseling. Increased knowledge about the value of this service would enable a larger percentage of the population to understand and feel comfortable using these services. ●


  • Jean Ballard

    Jean Ballard is a senior manager at Actualize Consulting, working in the mortgage and fixed-income practice. She earned a bachelor’s degree in finance and marketing from the University of Virginia, an MBA in finance from George Mason University and a master’s in project management from George Washington University. Ballard started at Actualize more than 10 years ago and has spearheaded the consultancy’s affordable housing effort since its inception.

  • Kathryn Williams

    Kathryn Williams is a senior consultant at Actualize Consulting, working in the mortgage and fixed-income practice. She earned a bachelor’s degree in government and French from the University of Virginia. Williams has experience working in legislative roles, conducting policy research and analyzing congressional hearings, with an emphasis on affordable housing. She has been working on affordable housing practices since joining Actualize.

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