Is Homebuyer Education Required in Colorado?

Quick version: whether you need a homebuyer education class depends on your loan program and your lender, so ask your lender early. On a Fannie Mae loan that requires it, the education has to be completed before closing, and housing counseling from a HUD-approved agency can count instead.

It depends on your loan program

Whether a class is required depends on your loan program and your lender. Ask your lender what applies to you.

Fannie Mae's homeownership education and housing counseling rules are a good example of how specific this gets. For the transactions it lists, at least one borrower on the loan must complete homeownership education prior to loan closing.

On a Fannie Mae loan, education can be required when:

Every borrower is a first-time buyer and the loan is a very high share of the home's value. Fannie Mae sets a loan-to-value threshold for this, and your lender can tell you whether your purchase crosses it.
It's a HomeReady purchase and all occupying borrowers are first-time homebuyers.
On a purchase underwritten through Fannie Mae's automated system (DU), no borrower has a credit account or installment account on their credit report. When DU calls for it, this one can apply whether or not you're a first-time buyer.
No borrower has a credit score on a manually underwritten purchase. That also applies regardless of first-time status.

Freddie Mac has its own version. Its CreditSmart Homebuyer U FAQ says the Homebuyer U certificate meets the Freddie Mac homeownership education requirement for Home Possible and HomeOne mortgages.

For other loan types, such as FHA, VA and USDA, ask your lender what applies. Some down payment assistance programs may also ask for an education course or counseling as part of their own rules. The lender will need to determine which requirements apply to your loan, so ask early.

What counts as a homebuyer education course

Not every financial education course produces a certificate a lender can use, so check before you start.

Who can provide it. Fannie Mae permits any qualified third-party provider, independent of the lender, to administer homeownership education.
What standard it meets. Fannie Mae says the provider's content must be aligned with NIS or HUD standards, which refers to the National Industry Standards for homeownership education and counseling.
Format is flexible. Fannie Mae allows the education to be delivered in person, online, by phone or in a hybrid format.
The certificate. On a Fannie Mae loan, the lender must keep a copy of the certificate of course completion in the loan file.

Freddie Mac's Homebuyer U is one option. Its FAQ says the course is free, and that users can anticipate completing the entire course within three hours. You can come back to it later if you don't finish in one sitting.

Watch the name, though. Freddie Mac's FAQ points out that CreditSmart Essentials is not a homeownership education course. Before you start a course, ask your lender whether its certificate will meet your loan's requirement.

Does a HUD-approved housing counselor count?

On a Fannie Mae loan, it can. Fannie Mae says that in lieu of homeownership education, the borrower may receive housing counseling. That counseling must be provided by a HUD-approved agency and meet HUD standards for delivering it.

Here's a detail worth knowing: HUD doesn't approve homebuyer education courses. Freddie Mac's FAQ says plainly that HUD does not approve homeownership education curricula. HUD approves counseling agencies, not classes. A course can be aligned with the national standards, but the "HUD-approved" label belongs to the agency.

The CFPB explains that a HUD-approved housing counselor is specially trained and certified by the government, and can help you learn about the homebuying process. The same page links the CFPB's Find a Counselor tool for agencies near you.

When to take it, and why sooner is better

On a Fannie Mae loan that requires it, the education has to be completed before closing. For other programs, ask your lender when it must be done. On a Fannie Mae loan, that means you may be able to finish it before you're under contract.

Finishing the course before you go under contract keeps one more task out of the closing window. That window can fill up with the appraisal, insurance, conditions and signing.

Here's a simple order to follow:

Ask your lender whether your likely loan program requires homebuyer education or counseling.
Confirm the provider with your lender before you start.
Finish the course or counseling and save the certificate.
Send the certificate to your lender so it's in your file well before closing.

If you're a renter planning to buy in a year or so, this is a step you may be able to finish early, on your own schedule. Check with your lender first.

If your loan doesn't require it

You can still choose to take a course. Freddie Mac's FAQ says Homebuyer U is free, so taking it early costs you only your time.

If you're still early, Diane's first-time homebuyer roadmap lays out the steps in order. When you're ready to talk to a lender, here's how to get pre-approved for a mortgage in Colorado, and the Colorado homebuyers guide covers the bigger picture.

Where to start

Ask whether your loan needs a course before you sign up for one. If it does, pick a provider your lender can accept, finish it early and keep the certificate.

Diane also helps buyers in Arizona, Montana and Florida.

Want to know what applies to your purchase? Take the two minute quiz or call Diane at 719-687-2112.

Diane Beaumont is Branch Manager and a Loan Originator with Benchmark Mortgage Colorado, licensed in Colorado, Arizona, Montana, and Florida. This article is for education only and is not a commitment to lend. Program requirements, eligibility and approval depend on your file and the property.

Diane Beaumont, Mortgage Loan Originator, NMLS #247026. Benchmark Mortgage, a dba of Ark-La-Tex Financial Services, LLC, NMLS #2143. Equal Housing Lender. Not a commitment to lend.