By Broderick Perkins
A national initiative to educate consumers about the mortgage lending process, and help more of them become homeowners, couldn't come at a better time.
Fannie Mae's 1999 National Housing Survey revealed unexpected ignorance among consumers about bad credit, and other consumers failed Chicago-based Bank One's home equity test.
"Passport to Homeownership" a joint initiative by the U.S. Department of Housing and Urban Development (HUD) and the Mortgage Bankers Association of America (MBAA) is designed to help more people better understand all aspects of the home loan process.
Passport focuses on the esoteric world of underwriting, the process lenders undertake to qualify you for a mortgage, in this case federally insured loans from the Federal Housing Administration, HUDs loan division.
The initiative also includes Web site information, educational advertising and plain language brochures to explain FHA's automated underwriting system, how to maintain good credit, how to save for a down payment, and how to successfully navigate the home loan process.
On the Internet, HUD will give you a computerized evaluation of your loan request, including a look at your credit history, income, assets and debts, all to determine if you qualify for a mortgage. If you don't meet underwriting requirements, you won't be rejected but referred to lenders who will further review and analyze your qualifications. The referrals will come with specific areas of concern you must address to qualify for a loan.
FHA mortgage insurance enables consumers to qualify for mortgages when they might not otherwise -- with down payments as low as 3 percent, borrowed closing costs, less than perfect credit ratings and a higher debt-to-income ratio.
"Buying a home is the most expensive, most complicated, and most intimidating financial transaction most Americans ever make," said HUD Secretary Andrew Cuomo.
"Some people who could qualify for mortgages don't apply because they fear the process is too hard and fear they'll be turned down. We'll use our education campaign to demystify the home buying process and end these fears, so we can transform home ownership from a distant dream into a reality for more families," he added.
Reach HUD at (202) 401-0388; (202) 708-1455 (TTY) or visit their "Home Buyer's Kit" for more information.
Fannie Mae's program
A few months ago, after it discovered widespread ignorance about how bad credit can affect mortgage qualifications, Fannie Mae launched "Your Credit Matters," an educational campaign to give potential borrowers the scoop on credit.
Fannie Mae discovered:
-- Thirty-one percent of those surveyed said being late paying utility bills three times in the past year would be no problem at all in qualifying for a mortgage.
-- Forty-one percent said it would be a major problem, 32 percent said it would be a minor problem and 18 percent said it would be no problem at all if he or she was more than 90 days late, three times or more paying a utility bill.
-- African Americans and Hispanics were more likely than whites to understand the consequences of late bill paying. While 62 percent of blacks and 46 percent of Hispanics understand it would be a major problem to be 30 days late paying a utility bill three or more times, only 38 percent of whites agreed.
Fannie Mae's program, designed to work in conjunction with existing publications, "Opening the Door to a Home of Your Own" and "Choosing the Mortgage That's Right for You," includes a new booklet, "Knowing and Understanding Your Credit."
The guide helps you understand what credit is, how to establish good credit and repair credit problems, and how to take care of your credit as a first step in the home-buying process.
Consumers can call (800) 605-5200 or visit the CreditGuide website.
Broderick Perkins, has been a consumer journalist for 20 years. Experienced in print, electronic, and consulting journalism, he is chief executive editor of San Jose, CA-based, DeadlineNews.Com, an editorial content and consulting firm.
© Copyright 1999 by Broderick Perkins. All Rights Reserved.