Participation in First-Time Homebuyer Education and Housing Counseling

Participation in First-Time Homebuyer Education and Housing Counseling

Homebuyer education and housing counseling services are designed to educate consumers about the homebuying process and the benefits and risks of homeownership. These programs aspire to support sustainable homeownership — an outcome that provides homebuyers with housing stability and financial independence. HUD supports homebuyer education through the delivery of education and counseling services from HUD-approved agencies.

New research sponsored by HUD’s Office of Policy Development and Research examines the effectiveness of first-time homebuyer education among low-, moderate-, and middle-income households. The First-Time Homebuyer Education and Counseling Demonstration enrolled and randomized over 5,800 prospective homebuyers between September 2013 and February 2016 to examine the short- and long-term effects of homebuyer education and counseling. This report examines the characteristics of study participants that predict participation and completion of in-person or remote first-time homebuyer education and counseling to understand the reasons individuals choose to participate in services, the characteristics of people who initiate or complete in-person and remote services, and the extent to which the characteristics that predict participation differ across service modes.

Research Design and Theory of Participation

The researchers developed a theory of participation to help measure the factors that influence the decision to access homebuyer education and counseling services. The researchers proposed that a rational person would participate in homebuyer education if the probability of benefiting from the services and the expected benefit from the services exceeded the cost of those services.

Drawing on a sample that included prospective homebuyers from 28 metropolitan areas, the study included treatment groups that received access to homebuyer education and counseling in different formats at no cost and a control group that was not offered any services. The treatment groups included those offered in-person services or their choice of in-person or remote services (29 percent of participants) and those offered only remote services (29 percent). The control group, consisting of 42 percent of participants, was not offered access to services.

The report explores four measures of education and counseling participation, including “whether the study participant initiated any [homebuyer education and counseling] services; whether the study participant completed the education curriculum; whether the study participant completed one-on-one counseling; and whether the study participant completed all homebuyer education and counseling services.” The researchers obtained baseline data for all study participants, including the following:

• Characteristics of the population sample’s demographics, attitudes and beliefs, housing arrangements, financial capability and knowledge, and creditworthiness.
• Data detailing the housing education and counseling services that treatment group participants received;
• A short-term follow-up survey administered to treatment group members 12 to 18 months after study completion to discuss the reasons why they did or did not complete homebuyer education;
• Focus group surveys with treatment group members to discuss their experiences with homebuyer education and counseling or why they chose not to participate.

Using the measures of participation detailed above, the researchers developed a regression analysis to model outcomes among treatment group members who were referred to in-person services and treatment group members who were referred to remote services. The researchers were primarily interested in understanding how baseline characteristics influenced service participation and how having the choice of in-person or remote services influenced participation rates.

Findings

Overall, 55 percent of those who were offered homebuyer education and counseling services initiated any homebuyer education or counseling services. Approximately one-third of participants completed the education curriculum, approximately one-third completed the counseling services, and one-fourth completed both the education curriculum and one-on-one counseling.

The study demonstrates meaningful differences in the rates of participation and completion among those who were offered in-person services compared with those who were offered remote services. Both initiation and completion rates were much lower among participants who were offered in-person services than for those offered remote services. Approximately 63 percent of those offered remote services initiated either online education or telephone counseling, whereas 26 percent of those offered in-person education or counseling chose to participate. Approximately 27 percent of those offered remote services completed all of the available education and counseling, whereas only 14 percent of those who were offered in-person services completed all of the services.

Among the choice treatment group (those who were given the opportunity to choose the method of service delivery), approximately three-fourths of participants chose remote services. Allowing participants to choose the method of service delivery resulted in increased access to education and counseling through remote delivery methods.

Among those who did not participate in counseling or education, the primary reason given for nonparticipation was that the programs were inconvenient and conflicted with their schedules. Those who did not complete in-person services were generally more likely to cite a scheduling conflict than were those who did not complete remote services. For those offered in-person services, 20 percent reported the distance from the agency as the determining factor in their nonparticipation. Among those offered remote services, 19 percent reported that the courses/counseling lasted too long. Only 10 percent of those offered in-person services reported that the course length was the determining factor for not participating.

In addition to exploring participation rates among those offered in-person and remote services, the researchers also explored the characteristics of those who participated.

Overall, the study found that women were more likely than men to participate in in-person education and counseling services. Those with some college education but no degree were less likely to participate in in-person services than those with a bachelor’s degree or higher. Race, ethnicity, age, marital status, and household size were generally not statistically significant measures of in-person service participation.

As with those offered in-person services, men were less likely than women to participate in remote counseling or education. For both in-person and remote services, females and those with a college education were more likely to participate, as were those with a greater knowledge of the mortgage process. Those with a credit score of 740 or greater were more likely to participate than were those with a credit score between 620 and 739.

Discussion

The report provides insight into the characteristics of participants in education and counseling programs along with information about the preference for in-person versus remote services. Overall, women and those attaining a higher level of education were more likely to participate in education and counseling services. Race or ethnicity, age, marital status, and household size were not statistically significant predictors of participation in homebuyer education and counseling services.

Those who were offered in-person services were more likely to participate if they were in the early stages of the homebuying process, reported being “pretty good at math”, or reported planning to purchase a home without a co-borrower. Those referred to remote services were more likely to participate if they planned to spend more years living in their purchased home, received higher scores on a baseline mortgage literacy quiz, or had a baseline credit score of 740 or higher.

Although this research assesses the individual characteristics associated with participation in education and counseling, it does not provide any insight into the effectiveness of education and counseling services or whether in-person or remote services are more effective. Such findings will be analyzed in subsequent research that is part of the First-Time Homebuyer Education and Counseling Demonstration.