Housing counselors can help guide you through the home-buying process — often for free.

Do you have your eye on a dream house, without a clue on how to get your foot in the door? Perhaps it's time to head to home-buying class.

That's what 38-year-old Maria Huerta of Phoenix did. Years ago, she promised her mother she would one day become a homeowner. But after her husband left her with less-than-perfect credit and four kids to support, that goal seemed more like a dream. That is, until a realtor referred her to the folks at Neighborhood Housing Services Phoenix, a member organization of NeighborWorks, a nonprofit dedicated to increasing home ownership.

At NHS, Huerta took an eight-hour class that taught her everything from household budgeting to understanding the closing process. A housing counselor then showed her how to clean up her credit report and qualify for a loan with a competitive interest rate. After just five months, Huerta secured a mortgage, and is now the proud owner of a three-bedroom home with plenty of outdoor space for her daughters to roam.

Many first-time buyers need help navigating the overwhelming and often intimidating process of purchasing a home — especially these days, when home prices have soared and mortgage rates are expected to head up. Compounding the problem, the mortgage industry continues to "innovate," with some lenders, including Countrywide Financial, now offering more than 100 different loan products to choose from. Needless to say, the stakes are high; picking the wrong mortgage product could be disastrous. Seeking help from a neutral professional — rather than, say, Uncle Joe — can only help stack the cards in your favor.

While many home-counseling organizations are geared toward low and moderate income families, don't let that deter you from seeking their services. Doug Dylla, manager of NeighborWorks' single-family initiative, says all sorts of buyers, from teachers to doctors, walk through its doors. "Given the scale of investment and complexity (of the transaction), almost anyone would benefit." In fact, many consumer advocates would like to see home-buyer education a requirement for every first-time home buyer.

Indeed, studies show that consumers who meet with housing counselors and seek home-buyer education have a higher success rate as home owners. According to a study that analyzed 40,000 mortgages originated under Freddie Mac's Affordable Gold program, the group of borrowers who received individual counseling had a 34% lower delinquency rate than those who didn't.

Seeking Help
Where can you find a housing counselor? Most work for nonprofit organizations, such as NeighborWorks and ACORN Housing, although some lenders and insurers also keep counselors on staff. To find a local home-buying program in your area, go the HUD Web site and click on your state for a listing of all the agencies it funds. You could also try contacting your state or county housing finance agency. Many church groups, credit unions and employers also have relationships with local counselors.

What should you expect from a housing counselor? Most nonprofit organizations offer a free (or low cost) eight- to 10-hour class that walks consumers through the entire home-buying process, from the nuances of underwriting (including the debt to income ratios lenders use to determine how much money to lend) to the difference between an interest-only mortgage and a 30-year fixed-rate product. (For more on loans, read our story.)

Of course, there's more to buying a home than just the financing process, says Ken Packman, a housing counselor with Ithaca Neighborhood Housing Services. That's why counselors also teach about the importance of home inspections and offer basic budgeting guidelines, including how much money to set aside for basic upkeep of the property.

Another benefit of meeting with a housing counselor is that he or she can sort through vast databases to see if you qualify for any of the downpayment assistance programs available in the area. While many of them are limited to people with low to moderate incomes, that's not always the case. Areas trying to revitalize certain neighborhoods might waive income limits entirely. So even if you don't think you have the time for a full eight-hour class, it pays to lob in a phone call to see what programs are available.