Who Needs Homeownership Education
Home Possible mortgages require homeownership education in two specific situations. The first applies when you're buying a home and all occupying borrowers are first-time homebuyers. Fannie Mae defines a first-time homebuyer as someone who hasn't owned a home in the past three years.
The second situation involves borrowers who establish their credit reputation using only non-credit payment references. This happens when you don't have traditional credit accounts like credit cards or auto loans. Instead, your lender verifies your payment history through rent receipts, utility bills, or other non-credit sources.
Say you're 25 years old, have never owned a home, and you're buying your first house with your spouse who also has never owned property. Both of you must complete homeownership education before closing. The education requirement applies to all occupying borrowers in these situations, not just the primary borrower.
Approved Education Programs
Fannie Mae accepts several types of homeownership education programs. HUD-approved counseling agencies offer courses that meet the requirement. Many of these agencies provide free or low-cost classes in person or online.
Housing finance agencies in your state also provide approved programs. These agencies often tailor their education to local market conditions and first-time buyer programs available in your area.
Freddie Mac offers a free online homeownership course called CreditSmart Homebuyer U. This program covers topics like budgeting, mortgage basics, and the home buying process. The course takes about 8 hours to complete and provides a certificate upon completion.
Community development financial institutions and mortgage insurance companies also offer qualifying programs. Any program that meets the National Industry Standards for Homeownership Education and Counseling satisfies the requirement.
Landlord Education for Multi-Unit Properties
If you're buying a 2-4 unit property as your primary residence, you need landlord education in addition to homeownership education. This requirement applies only to purchase transactions, not refinances.
At least one qualifying borrower must complete the landlord education before closing. The program cannot be provided by anyone with a financial interest in your transaction. This means your lender, real estate agent, or seller cannot provide the education.
Say you're buying a duplex where you'll live in one unit and rent out the other. You need both homeownership education (if you're a first-time buyer) and landlord education. The landlord education covers topics like tenant screening, lease agreements, fair housing laws, and property management basics.
Your lender must keep a copy of your landlord education certificate in the loan file. Make sure you receive a completion certificate and provide it to your lender before closing.
Required Documentation
Your lender needs proof that you completed the required education. Most approved programs provide a certificate of completion that includes your name, the program name, completion date, and the provider's information.
The certificate must show completion before your loan's note date. For construction-to-permanent loans and renovation mortgages, completion must occur before the effective date of permanent financing.
Submit your certificate to your lender as soon as you complete the program. Don't wait until the last minute, as processing delays could affect your closing timeline. Keep a copy for your records in case the original gets lost.
Some online programs email certificates immediately upon completion. Others mail physical certificates that can take several days to arrive. Plan accordingly and complete your education well before your scheduled closing date.
Why These Requirements Exist
Fannie Mae requires education because first-time homebuyers and borrowers with limited credit history face higher risks of default. The education helps borrowers understand their mortgage obligations, budgeting for homeownership costs, and maintaining their property.
Research shows that borrowers who complete homeownership education have lower default rates than those who don't. The education covers topics like understanding your mortgage terms, budgeting for maintenance and repairs, and knowing when to seek help if you face financial difficulties.
For multi-unit properties, landlord education reduces the risk that rental income won't materialize as expected. New landlords often underestimate the challenges of tenant management, property maintenance, and local rental regulations.
Common Complications and Gotchas
Timing creates the most common problems with education requirements. Some borrowers discover the requirement late in the process and scramble to complete education before closing. Online programs offer the fastest completion, but you still need time to receive and submit your certificate.
Not all education programs qualify for Home Possible mortgages. Make sure your chosen program appears on the approved list or meets the National Industry Standards. Your lender can help verify that a program qualifies before you enroll.
For multi-unit properties, finding approved landlord education can be challenging. The program cannot come from interested parties to your transaction, which eliminates many convenient options. Start looking for approved programs early in your home buying process.
Some borrowers assume that previous homeownership education satisfies the requirement. Fannie Mae requires completion before each Home Possible mortgage, even if you completed education for a previous home purchase with a different loan program.
Post-Purchase Counseling Support
Home Possible mortgages include ongoing support through early delinquency counseling. If you experience problems making your mortgage payments, your servicer must provide free counseling to help you explore options.
This counseling connects you with resources to address temporary financial difficulties before they become serious problems. The goal is to help you stay in your home and avoid foreclosure through loan modifications, payment plans, or other solutions.
The counseling requirement means your servicer cannot simply start foreclosure proceedings if you miss payments. They must first attempt to provide counseling and work with you on solutions. This protection gives you additional time and resources to address financial challenges.
References
For the official guidelines, see 4501.9: Homeownership education and landlord education for Home Possible® Mortgages in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Freddie Mac Guideline Text
This section contains requirements related to:
Homeownership education
Landlord education (2- to 4-unit Primary Residences)
Post-purchase and Early Delinquency Counseling
(a)
Homeownership education
At least one occupying Borrower must participate in a homeownership education program before the Note Date, or the Effective Date of Permanent Financing for Construction to Permanent Mortgages and Renovation Mortgages, in each of the following instances:
For purchase transactions when all occupying Borrowers are First-Time Homebuyers, or
For any transaction when the credit reputation for all Borrowers is established using only Noncredit Payment References
Note: The following are acceptable homeownership education programs:
Programs provided by HUD-approved counseling agencies, housing finance agencies, community development financial institutions or mortgage insurance companies
Freddie Mac’s free homeownership education course,
®
(opens in new window)
Programs that meet the National Industry Standards for Homeownership Education and Counseling
Section 5103.4
for other requirements related to homeownership education.
(b)
Landlord education (2- to 4-unit Primary Residences)
For
purchase transactions
, at least one qualifying Borrower must participate in a landlord education program before the Note Date, or the Effective Date of Permanent Financing for Construction to Permanent Mortgages and Renovation Mortgages. Landlord education must not be provided by an interested party to the transaction, the originating lender or the Seller.
A copy of a certificate evidencing successful completion of the landlord education program must be retained in the Mortgage file.
Note: For refinance transactions, landlord education is not required but is recommended for Borrowers who have not previously attended a program.
(c)
Post-purchase and Early Delinquency Counseling
The Seller, as Servicer, must provide (at no cost to the Borrower) Early Delinquency Counseling to all Borrowers who experience problems meeting their Mortgage obligations, in accordance with
Sections 9101.2(e)
and
9102.4(c)
.
