Helping FSS Participants Build Assets
and Financial Capability

Module 5.3: Homeownership and Other Housing Transitions

Introduction to This Module

While FSS graduates may stay in subsidized housing, FSS programs often encourage participants to think about their future housing arrangements which could include transitioning to market-rate rental housing or homeownership.

Leaving subsidized housing assistance may be easier for FSS participants in some communities than others, depending on:

  • Home prices
  • Rent levels
  • Salary/wages for attainable jobs.

Some FSS participants may have a personal goal to become homeowners. FSS can help many of these families achieve this goal.

Helping Families Become Homeowners and Market Renters: ITSP Goals

It is good practice to include a discussion of future housing arrangements in early conversations with new FSS participants. Those who want and expect to be financially able to purchase a home by the end of the FSS term will want to identify “prepare for homeownership” on their Individual Training and Services Plan (ITSP) as one of the goals of their Contract of Participation. Others may express a desire to move out of subsidized housing, while others may not choose either goal.

Remember that ITSP goals are a condition of graduation and FSS participants may not be able to leave subsidized housing or achieve homeownership for reasons beyond their control. For this reason, it is best not to specifically identify “becoming a homeowner” or “moving into market-rate rental housing” as goals in the ITSP.

Good ITSP goals related to housing should include steps related to removing barriers or preparing for a change. For example, “complete a homeownership education course,” “participate in credit counseling” or “become prepared for homeownership.”

Helping Participants Prepare for Homeownership

FSS coordinators should help families interested in homeownership to set short- and long-term goals that will enable them to achieve a high enough level of earnings and FSS escrow and a high enough credit score that they may be able to purchase a home.

The following pages describe how qualified coordinators can work with participants to improve their credit scores and budgeting practices, connect participants to available home purchase programs, support and encourage homeownership education, and help ensure that participants are making informed homeownership and borrowing decisions.

This video clip describes a best practice of working with a participant interested in homeownership or moving to market-rate rental housing to compare the amount of money they are currently earning with a living wage sufficient to enable them to achieve this goal.

FSS © 2017 | U.S. Department of Housing and Urban Development

Work with Participants on Credit and Household Budgeting

Working with participants on credit, budget savings, and financial capability is especially critical for participants who seek to become homeowners because they will need a good credit score to qualify for a mortgage as well as savings for a down payment.

The goal of homeownership can be a strong motivator for participants to make progress in these areas.

Coordinators may work with participants interested in homeownership to assess their basic financial resources, suggest how to meet milestones, such as establishing a bank account, and discuss how to build credit and make and stick to a budget to meet homeownership goals. Where program coordinators are not qualified to work on budget, credit, or debt with participants, they should refer participants to providers within the community (see table and national suggestions of financial capability providers in Module 5.1).

Require Completion of Homeownership Education Programs

Programs have found that families are better prepared to purchase a home and maintain homeownership if they take comprehensive homeownership education/training at least two years prior to their target date for a purchase. That gives them time to build escrow and another savings account and/or Individual Development Account for down payment, inspection, and settlement costs (and to understand the extent of what these costs include). HUD recommends partnering with a HUD-Certified Housing Counseling Agency (more info) for these services. Coordinators should also check state and local rules for down payment assistance and low-cost mortgage programs to ensure they are aware of local requirements. For example, Massachusetts’ down payment assistance program requires that prospective homeowners have completed homeownership education within the past year.

Learning in depth about home purchase helps the FSS participant assess (with the guidance of the FSS coordinator or homeownership counselor) whether home purchase is realistic for them.

It’s also important that potential home buyers understand that they will need savings to be able to cover appliances, heating/cooling systems that break and other necessities. Preparing in advance for home purchase also ensures that the family has financial stability—employment, credit card, a history of paying rent and utilities on time, etc.

Homeownership education programs typically include classroom or online learning and a one-on-one counseling component (in person or over the phone).

Homeownership Coordination Activities

If an FSS coordinator is certified by HUD as a homeownership counselor, the coordinator may educate participants on available home purchase programs. There are many programs available to help first-time homebuyers. Available home purchase programs in your area may include Habitat for Humanity (or other sweat equity programs), Community Land Trusts (or other nonprofit homeownership programs), below-market mortgage financing offered by the state or city, or a community college or high school construction program that builds affordable housing. In addition, the PHA, city, or county may also develop or fund affordable housing for purchase. Finally, some communities have programs that make a share of newly developed housing units affordable at below-market prices through inclusionary zoning or other similar approaches.

Additional Issues to Raise with Potential Homebuyers

These issues should all be covered in a homeownership education course but it’s helpful for FSS coordinators to reinforce them with the participants seeking to become homeowners (click the arrows to expand the content):

FSS coordinators should also make sure potential homebuyers fully understand the risks of homeownership, including the possibility the home may not appreciate or may depreciate, the potential to be “locked into” a home and neighborhood they may not wish to stay in, the risks associated with maintaining a home in good condition if it has many structural defects, the risks of predatory lending and refinancing, and the risks associated with foreclosure should they be unable to keep up with their payments.

Helping Participants Who Wish to Transition to Market-Rate Rental Housing

Some families may choose to move out of public housing or multifamily assisted housing or give up their Housing Choice Voucher and move into market-rate rental housing or into other housing programs where rents are not based on income, such as properties funded through the Low-Income Housing Tax Credit (LIHTC). While FSS participants are not required to pursue a transition out of housing subsidy, FSS programs should support participants in this goal if they choose it.

One important point of assistance is to help participants calculate and understand the income they will need to achieve in order to afford market-rate rental housing in different neighborhoods. Coordinators can also provide the addresses of housing that may be a stepping stone to market-rate housing, such as properties funded through the LIHTC. And coordinators can help participants understand the pros and cons of moving out of subsidized housing.

Efforts undertaken to help participants increase their earnings and credit scores will also help participants achieve this goal. Most FSS participants will need higher earnings to afford unsubsidized housing. They will also need savings for a security deposit and moving expenses which can come through the escrow account.


Please complete this quiz before you proceed to the next module. To take the quiz, use the arrow keys or click the correct answer choice. If you answer incorrectly, you will be able to try again until you select the correct response.
Scores will not be recorded.

1. True or False: If an FSS participant wants to become a homeowner or leave subsidized housing, the FSS coordinator should include “becoming a homeowner” or “moving into market-rate rental housing” as ITSP goals.

A - TRUE. This is an appropriate ITSP goal, as long as it is the participant’s stated goal.Incorrect.Meeting ITSP goals is a requirement for graduation from FSS, and a participant may not be able to become a homeowner or leave subsidized housing during FSS participation for unforeseen reasons or reasons beyond his or her control. Goals such as preparing for homeownership (including completing a homeownership course) are more appropriate.B - FALSE. Even if homeownership or becoming a market renter is the participant’s stated goal, this is not an appropriate ITSP goal.Correct!Meeting ITSP goals is a requirement for graduation from FSS, and a participant may not be able to become a homeowner or leave subsidized housing during FSS participation for unforeseen reasons or reasons beyond his or her control.  Goals such as preparing for homeownership (including completing a homeownership course) are more appropriate.

2. How can FSS programs help interested participants prepare for homeownership?

A - Help participants identify necessary interim steps to homeownership, such as increasing credit score and raising sufficient savings for a down payment and closing costs.Partially correct.Identifying interim steps is important, but participants may need support or guidance to meet these interim goals, and may need help in confirming whether homeownership in the area is feasible.B - Help participants calculate and understand what it will cost to be become a homeowner and maintain a home and to understand the risks and benefits.Partially correct.Participants may need help to understand how much it would cost to own and maintain the home that they want in the area where they live or want to live. However, if the participant decides to go forward in pursing homeownership, they will need additional support in fulfilling interim steps.C - Refer participants for services such as credit counseling and homeownership education. Refer or provide budgeting support and planning.Partially correct.Participants will need help meeting these important goals to become homeowners, but may also need to confirm whether homeownership is possible and desirable for them and will need help identifying their specific interim steps necessary to purchase and own a home.D - All of the above.Correct!To approach homeownership, ideally, participants will need to know that homeownership is feasible and desirable for them, what interim steps they need to take to reach this goal, and how to achieve those interim steps.

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