Rooted
From financial literacy to first-time buyer: How community lenders can build homeowners early
Integrate financial literacy into your community lending strategy to help prepare future homeowners.
If we’re serious about overcoming obstacles to homeownership, we need to stop thinking about homebuyer education as something that happens right before a loan is approved and start thinking about it as a long-term investment in financial literacy.
Why? Because by the time someone walks into your office asking about a mortgage, they’ve already made a decision. They’re in the game. But what about the millions of people who never get that far because they believe homeownership is out of reach?
That’s where true community lending starts – not at the closing table, but in the classroom.
Homebuyer education needs a rethink
Traditionally, homebuyer education has been tied to compliance. It’s often just another line item, something to check off so a borrower can qualify for a loan or down payment assistance.
But that narrow view misses the point. Education isn’t just about getting someone through the loan process. It’s about empowering people to want to become homeowners in the first place and preparing them to succeed when they do.
Starting in March 2023, Fannie Mae and Freddie Mac began requiring lenders to use the Supplemental Consumer Information Form (SCIF) to report whether a borrower has completed homebuyer education or counseling. That’s a step in the right direction, but again, it mostly captures borrowers who’ve already made the leap.
To move the needle on homeownership rates, especially for Gens Y and Z, we need to start much earlier.
Start early: Financial literacy is the foundation
According to Zillow, roughly 44 million households were not “mortgage ready” in 2022.1 Mortgage readiness is determined using the borrower’s credit profile, income level, and debt-to-income ratio. The fact that they weren’t mortgage ready doesn’t mean they wouldn’t ever be able to buy a home, but it means they weren’t there yet.
The key to closing that gap? Early financial education.
If we had reached those people in high school or early adulthood and taught them the fundamentals of money management and credit, how many of them might be homeowners today?
Here’s what early financial literacy can teach:
- How to budget and save
- The real impact of credit scores (and how to build one)
- What banks do and how to use them
- How mortgages work and what’s really required to qualify
- Why homeownership builds long-term financial stability and generational wealth
This kind of foundational education makes homeownership feel achievable and turns it into a goal people work toward, rather than something they dismiss as impossible.
A natural extension of full-cycle lending
This concept fits seamlessly into the NeighborWorks® Full-cycle Lending® approach, which emphasizes wrap-around support, not just for buying a home, but for staying in one.
Imagine the impact if more borrowers entered the process already understanding what it means to manage a mortgage, build equity and navigate financial ups and downs. Early education reduces the learning curve, improves loan performance and helps families stay in their homes long-term.
It’s not just good for communities, it’s good for business.
Building trust through the right partnerships
Let’s not overlook a critical point: Many of the communities we’re trying to reach have a long-standing mistrust of the U.S. housing and financial systems.
So, if you’re planning to expand financial literacy outreach, don’t do it alone. Partner with organizations that already have strong, trusted relationships in the communities you’re trying to serve.
That could mean:
- Nonprofits with a housing or youth development mission
- Schools and educational nonprofits, especially as states begin mandating financial literacy courses
- Housing authorities or local NeighborWorks affiliates already engaged in community development
- Faith-based organizations that reach families at the local level
One high-impact idea: Co-develop a financial literacy program for high school students and their families. According to Pew, a growing number of states now require a personal finance course to graduate, meaning the timing is perfect for lenders to step in with real-world expertise.2
Bottom line: Education is your most powerful community lending tool
Helping someone get a mortgage is important – but helping someone believe they can become a homeowner in the first place is transformational.
If we want to help future generations overcome the hurdles to homeownership, we have to meet people earlier in the journey. That starts with early, practical financial education, delivered through trusted community partners and reinforced with accessible mortgage products and real support.
You’re not just a lender. You can be a builder of financial confidence, economic mobility and generational wealth for your borrowers.
1 Zillow, 2024; calculated by subtracting the number of “mortgage ready” families from the total number of families renting
NeighborWorks® and Full-cycle Lending® are registered trademarks of Neighborhood Reinvestment Corporation.
Need a partner to help refine your approach?
Our community lending specialists are here to collaborate with you, as an exclusive benefit of working with MGIC, and one more way we are leading the industry. Reach out to your MGIC account representative to get connected.
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