Financial Education Offers a Path to First-Time Homeownership: Success Stories and Teaching Tips

Grace Estivenson, a financial educator in Florida who recently taught the FDIC's Money Smart curriculum in English and Spanish for a bank in Casselberry, remarks that many of her students, particularly immigrants, are "very misinformed about the programs and institutions available to help when they have questions or need assistance." Estivenson gave the example of a couple from Mexico -- the husband a master carpenter and roofer, the wife busy at odd jobs while also taking care of their three kids -- who got robbed twice in their home by thieves who knew that the family didn't use a bank account and "carried their cash everywhere."

But after taking the Money Smart course, she said, the family opened a checking account, a regular savings account and an Individual Development Account that featured matching contributions from private and public sources for low-income people who want to buy a first home. Within six months, the couple applied for a loan to start a roofing business, which is now growing. More recently, they became homeowners. What made the difference? "Thanks to Money Smart," said Estivenson, "they learned that they have the security of the banking system to help and support them."

Homeownership is still the American dream for many people. And despite the current turmoil in real estate markets, many individuals will become homeowners this year, thanks in large part to financial education being offered by hard-working, dedicated staff at nonprofit organizations, government agencies and banking institutions. How can financial educators help people who want to buy their first home? Here are some tips and success stories:

• Start by teaching the basics of banking and money management. Budgeting, managing a checkbook, responsible use of credit cards, being aware of scams, and learning the importance of saving money are just some of the essential concepts for homeownership. Money Smart's "Money Matters" module can be especially helpful teaching these fundamental skills. "It is difficult, perhaps even counterproductive, to become a homeowner before these fundamental concepts are understood," said Luke W. Reynolds, an FDIC Community Affairs Specialist.
  
  

  Curtis and Gwen Daglow were able to purchase their first home, in Richmond, California, by practicing what was taught in a Money Smart financial education class about how and why to save money.

  Curtis and Gwen Daglow of Richmond, California, recently reflected on preparing to become homeowners by learning the importance of saving money at a Money Smart course offered by the Community Housing Development Corporation of North Richmond. Curtis said he started, for example, to "take my lunch to work and really think about how I spent money. Before you knew it, Gwen showed me the bank statement and we had $5,000! I don’t really miss my old spending ways." The Daglows are now homeowners and are eager for others to follow suit. Said Curtis, "We are telling any relative, friend or stranger that with hard work, dedication and a helping hand, anyone can build assets for their future and see their dreams come true."
  
  
• Build upon the basics by providing an overview of homeownership. This is often part of the general class on money management, but it is sometimes taught as a class just for people who want to become homeowners. The "Your Own Home" module of Money Smart explains the steps involved in buying a house. Students learn the benefits and pitfalls of renting versus owning a home, steps required to buy a home, questions to ask to determine readiness to buy a home, basic terms used in a mortgage transaction, and a brief overview of mortgage loan options.
  
  "Money Smart was the key to getting my parents into their own home," said Oksana Pashko, Business Development Officer with IndyMac Bank, FSB, in Pasadena, California. She described how her Ukrainian immigrant parents became homeowners after reviewing the Russian language translation of the "Your Own Home" module. "The information they gained from the module gave them the necessary tools to understand and successfully navigate the homeownership process, including learning about various programs available to low-income borrowers," she said.
  
  
• Offer more comprehensive training on shopping for a home. A homebuyer education course typically covers topics such as selecting a real estate agent, understanding the appraisal process, learning more detailed information on the pros and cons of various options for financing a home, finding down payment assistance programs, and selecting homeowners insurance. Some educators offer this training separately from more basic information about financial education or homeownership, while others integrate the material into one course. "Neither approach is wrong," said Reynolds. "What is important is that instructors and organizations be flexible given the needs of the audience."
  
  
• Network with other educators and counselors. Financial educators should "teach within their comfort zone" instead of trying to be all things to all students, said Tom Stokes, Community Affairs Officer for the FDIC in Atlanta. Then, he said, network with other professionals in a two-way relationship to build on each other's strengths. For example, Stokes explained, Money Smart educators who specialize in the basics of money and banking can refer their students or graduates to certified housing counselors for a class or counseling about preparing to buy a home. Then, housing counselors with clients who need to learn the basics before buying a home may refer them to an appropriate Money Smart class.
  
  
• Consider special training for people who have already purchased a home. You can offer a class that focuses on being a responsible homeowner. Topics may include how to select a reputable home-improvement or home-repair contractor and how to avoid mortgage-related scams. But this training also can include reminders about the fundamentals of managing money. Gregory Housel of the Housing Authority of Kansas City, Missouri, tells of a homeowner who took a basic Money Smart class and reported back, "I learned how to save money, set a budget and spend responsibly. All my bills are paid, my holiday shopping is done, and I have money saved in the bank."
  
  
• Suggest private counseling for people who own homes and risk foreclosures. Some homeowners may need more specialized, individualized counseling based on their needs and circumstances. For example, people having trouble making timely mortgage payments or who are facing foreclosure should work with a trained counselor. These homeowners can be referred to the Homeowner's HOPE Hotline at the Homeownership Preservation Foundation (1-888-995-4673 or http://www.995hope.org/) o to a U.S. Department of Housing and Urban Development-approved homeownership counseling agency (1-800-569-4287 or www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm).
  
  

The FDIC congratulates banks, non-profit organizations and others for helping more Americans achieve the American dream – and just as importantly, retain it. Financial educators interested in becoming involved in the Money Smart program or other FDIC community development efforts are encouraged to contact their regional Community Affairs Officer.

See more Money Smart success stories (Read more.)