What are Housing Counselors?

Looking for advice on buying a home, renting an apartment or obtaining a reverse mortgage? Perhaps you've fallen behind on your mortgage, and you're hoping to avoid foreclosure. A housing counselor might be able to help you.

The U.S. Department of Housing and Urban Development (HUD) offers free or low-cost housing counseling to homeowners, renters, homebuyers, people facing foreclosure, homeless persons and those living with HIV/AIDS. These counselors can provide information, advice and support to help guide you through what can be a daunting or confusing process.

Below you will find out more about what HUD-approved counselors do, when and where to look for help, what to expect from the process and the costs involved.

Sources: HUD Exchange and Urban Institute

Unfortunately, there are people who purport to be housing counselors or loan modification experts who might try to take advantage of your situation. So, it is important to seek housing information or advice from a HUD-approved counselor. By working with a HUD-approved counselor, you know the services will be provided by an objective, qualified counselor, who is acting in your best interest.

HUD has a network of more than 2,000 HUD-approved housing counseling agencies that serve individuals and families across the United States and Puerto Rico. These agencies are trained to assist current and prospective homeowners and renters in making responsible choices regarding their housing and finances.

Nonprofit organizations that want to become a HUD-approved counseling agency must have provided housing counseling services for at least one year in their community. Agencies of local, county or state governments also are eligible.

Housing counseling agencies receive training through workshops, online courses and certificate programs. In some cases, HUD even hires organizations to provide direct training for counselors.

HUD-approved counselors provide services for free or at low cost. HUD allows agencies to charge a fee for some services, but the fees are regulated so they remain reasonable and affordable.

• About half of HUD-approved agencies provide services at no cost.
• HUD does not permit any fee to be charged for foreclosure-prevention counseling or homeless prevention services. Those services are always free, no matter who the provider is.

HUD provides three ways to find a qualified counselor.

Once you've completed an initial search and have a list of HUD-approved counselors, research those counselors. HUD-approved counselors are trustworthy and experienced, but some specialize in certain services, such as reverse mortgages or budgeting. Others provide counseling services in multiple languages. By checking out their websites, or calling for additional information, you'll be more likely to work with someone who's a good match for you, someone with whom you'll have a rapport and can provide the services you're seeking in a professional, yet comfortable manner.

Purchasing a home is a complex process that can be confusing, and maybe even a little scary, especially for first-time buyers. The paperwork can be difficult to understand and for someone who's never been through the process of buying a home, applying for a mortgage—determining what you can afford and choosing the best bank, term and rate—can be daunting. That's where a HUD-approved counselor can help.

They can also offer vital information to homebuyers about down payment assistance programs and other low-cost financing options. A survey by NeighborWorks America found that nearly 40 percent of respondents say they had not received any information about down payment assistance programs prior to purchasing a home.

Reverse mortgages are becoming more popular with seniors who have equity in their homes and want to draw upon it to supplement their income. But a reverse mortgage is not right for everyone.

The only reverse mortgage insured by the federal government is called a Home Equity Conversion Mortgage (HECM), and it's only available through an FHA-approved lender. To participate in the HECM program, you must first meet with an HECM counselor. That counselor will provide you with information on eligibility and repayment terms and advise you of the financial implications of reverse mortgages. He will also inform you about alternatives to a reverse mortgage so you can better determine if a reverse mortgage is right for you.

You can search for a HUD-approved reverse mortgage counselor on HUD's website or by calling 800-569-4287 toll-free.

Foreclosure filings fell to a 13-year low in the third quarter of 2019, according to real estate research firm Attom Data Solutions. But many Americans remain delinquent on their mortgages and face losing their homes.

Homeowners who work with housing counselors are nearly twice as likely to cure a serious delinquency or foreclosure and almost three times as likely to avoid foreclosure through a mortgage modification, according to a NeighborWorks study.

If you are having trouble paying your mortgage, don't delay. Seek out help from a housing counselor as soon as possible. The sooner you work with a counselor, the better the chances of resolving the problem without a foreclosure.

Private debt-counseling firms and attorneys provide similar services if you risk default, but they charge dearly for their services. HUD-approved housing counselors, on the other hand, provide foreclosure counseling free. They can help you sort through the programs available to assist you and might even be able to help you save your home.

If you had problems with a mortgage—a foreclosure, short sale, deed-in-lieu of foreclosure or bankruptcy—you might be entitled to a second chance to own a home under the FHA's "Back to Work" loan program. If you can show extenuating circumstances like a job loss led to the default, you could qualify for a new mortgage loan as long as those extenuating circumstances no longer exist.

Before you apply for the new mortgage, though, you must complete pre-purchase counseling with a HUD-approved counselor. That counselor will evaluate your debt and your ability to afford the new mortgage and will explain mortgage insurance and the mortgage application process.

Once you complete the required counseling, you can apply for a mortgage under the Back to Work program at least 30 days later. The application must be submitted, however, within six months of your completion of counseling.

Homelessness is, unfortunately, a common problem among veterans. While the number of homeless veterans has declined over the past few years, many still live outdoors. Housing counseling is available to veterans to help them find affordable housing and reduce the financial strain many returning veterans face.

Counseling is also available for veterans with VA loans who find themselves in financial trouble. VA Regional Loan Centers have technicians available to conduct financial counseling with veterans to help them avoid foreclosure and ultimately, help them back on their feet financially. Options may include a repayment plan for any delinquency, loan modification, short sale, deed-in-lieu of foreclosure or more time to sell the home. Veterans seeking counseling should call 877-827-3702 toll-free.

Those applying for Guaranteed Rural Housing Program loans, affordable housing loans guaranteed by the United States Department of Agriculture, might be required to complete a housing counseling program before being approved for a mortgage. This is not required for everyone, but the underwriter can demand it for first-time homebuyers or those with no home ownership experience or little credit. Those required to complete counseling can take a Fannie Mae pre-purchase program, or a comparable one such as HUD-approved pre-purchase counseling.

Sarah Gerecke is Deputy Assistant Secretary for Housing Counseling at HUD, spoke to MoneyGeek, to offer tips and answers to some of the common questions homebuyers and homeowners have regarding housing counseling.