Homebuying 101

For Qiana Johnson, who bought her first home—a studio condo in Chicago's Lakeview neighborhood—earlier this spring, the time spent in prepurchase counseling was well spent. At an evening seminar a real estate attorney, a lending officer and a real estate agent walked participants through the homebuying process. They talked a bit about the risky types of mortgages that "predatory lenders" sometimes offer to naive homebuyers. In her one-on-one session, Johnson and her counselor went over her credit report and talked about issues such as private mortgage insurance payments and how the monthly escrows for taxes and insurance would be different for a house versus a condominium. Johnson, a university librarian, had done a lot of her own homework on homebuying before taking the seminar, so none of this was a revelation. "I heard a lot of things that I knew already, but it was a great kind of reminder," she says.

Does it work? Steven Hornburg is an independent housing consultant who has examined decades' worth of existing research into the programs' effectiveness. He says the research doesn't offer unambiguous proof that buyers who undergo counseling are less likely to have trouble paying their mortgages, but the programs still appear beneficial. "There's not any one piece of research that solidly demonstrates an impact, and there's been very little really solid research done, but a lot of it is suggestive of an impact," he says. More evidence may be coming soon; Hornburg says HUD is currently conducting a long-term study to see how much benefit prepurchase counseling delivers to buyers.

From a buyers' standpoint, however, these programs are a great way to boost your homebuying and mortgage IQ before signing on to the biggest financial commitment of your life. "A lot of the special programs require counseling beforehand, but there are people out there who are going to be applying on the regular market who will benefit from prepurchase counseling," Hornburg says.

Just like getting out of a marriage, getting out of a bad mortgage can be extremely costly, in both financial and emotional terms. It's a commitment best entered into soberly and advisedly, and if counseling helps achieve that, it can be worth spending an evening or two back in the classroom.

Daniel McGinn is a NEWSWEEK national correspondent and the author of " House Lust: Americas Obsession With Our Homes ".

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