HAWK Program Saves First Time Homebuyers Thousands Of Dollars

FHA Launches New HAWK Program For First Time Homebuyers

We all value education, but did you know that the government rewards it? The US Department of Housing and Urban Development (HUD) reports that borrowers who receive counseling on the home buying process have delinquency rates 29% lower than the rest of first time homebuyers. Taking these numbers into consideration, the Federal Housing Administration (FHA) created the Homeowners Armed With Knowledge program — also known as HAWK. This program rewards first time homebuyers with lower premium mortgage rates when they take housing counseling.

SEE ALSO: Mortgages Rates And The Internet

What Is HAWK?

The goal of the HAWK program is to make a group of responsible first time homebuyers and to protect FHA funds. The program hopes to:
  • Improve borrower’s loan performance and budgeting skills
  • Reduce claims paid by the FHA’s Mutual Mortgage Insurance Fund
  • Increase access to affordable home mortgages
Those eligible to participate in the HAWK program are limited to first time homebuyers who qualify for FHA mortgage insurance. A quick and dirty guide for qualifying is as follows:
  • Have a steady employment history with a consistent income
  • Good credit report with no more than two thirty day late payments
  • Bankruptcy record must be at least two years old
  • Foreclosure record must be at least three years old
  • Mortgage payment must be 30% of your monthly gross income
If you meet these requirements, you can then enroll in HAWK. The program first connects you with a housing counseling agency. The housing counseling agency you go to must be HUD-approved. If it’s not, then you won’t receive any HAWK benefits. These agencies run lesson plans specifically on pre-purchase, pre-closing, and post-closing housing counseling. All of this training is defined by the National Industry Standards for Homeownership Education and Counseling.

Pre-Purchase Housing Counseling

This first part of the curriculum is the most detailed and time consuming. Here, you’ll do everything from learning how to speak complicated mortgage rate jargon, to practicing how to confront landlords and neighbors. Here’s what you’ll learn:
  • Assessing Homeownership Readiness. Go over credit, affordability, and assess whether or not owning a home is the right choice for you financially.
  • Budgeting and Credit. Learn how to track expenses and maintain good credit.
  • Financing A Home. Review all your lending options, the process, and how to finance it all.
  • Shopping for A Home. Understand the ins and outs of browsing the housing market as well as how Escrow and closing works.
  • Maintaining A Home and Finances. Comprehend the responsibility of property ownership and learn how to get involved with your community.
Borrowers must complete a total of six hours worth of pre-purchase housing counseling. Of those six hours, one and half hours must be dedicated to individual counseling.

Pre-Closing Housing Counseling

Counselors will educate you on what you should be doing after your purchase and before your closure. These lessons are similar to ones taught in pre-purchase counseling but are far more in-depth. In addition to this, counselors must review the following:
  • Mortgage loan information
  • General process for closing
  • Good Faith Estimate
  • Truth-In-Lending Statement
  • Loan disclosures
  • Mortgage and closing documents
  • APR  and interest rates
  • Appraisals
Borrowers must complete a minimum of one hour of pre-closing housing counseling. This section of counseling must be completed no later than three days prior to settlement.

Post-Closing Housing Counseling

Be sure to complete this section no later than one year after closing your loan. The post-closing lesson plan focuses on budgeting and maintaining good credit. Topics taught include:
  • Home renovations
  • Delinquency prevention
  • Recognizing home repair scams
  • Federal, state, and local laws relevant to your mortgage
  • Taxes
  • Home equity
  • Refinancing
  • Selling the home
Borrowers must complete a minimum of one hour of post-closing housing counseling.

SEE ALSO: Home Equity Loans: The Ins And Outs

Incentives For Becoming A HAWK

Along with receiving valuable knowledge about mortgage rates, the FHA rewards HAWK participants with a number of benefits. These benefits only come with an FHA-insured loan. Monetary savings for HAWK participants include:
  • 0.5% reduction of the upfront Mortgage Insurance Premium (MIP)
  • 0.25%  reduction of the annual MIP
As of July 2014, the FHA’s current upfront MIP is 1.75% of the loan size. If you complete the HAWK program, you would only have to pay 1.25% of your loan size. This half percent will shave thousands off your loan. The HUD estimates housing counseling to cost $100 per session. Don’t be turned off by this price tag. Future You will pat you on the back for making this small investment.
Sources: Hud.gov
Updated on: