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  • Writer's pictureNathan Zarcaro

6 Can't Miss Teacher Mortgage Programs for Educators Buying Homes

Updated: Oct 19, 2023


America's teachers work long and arduous hours in schools across the country, performing thankless work and improving the futures for children everywhere. And educators aren't in it for the money either.


In fact, many teachers make well under market value for their education level. Thankfully, there are multiple programs across the country to help educators to buy homes and pursue their homeownership dreams.


Today, we're back to talk about six can't miss teacher mortgage programs to consider!




teacher mortgage calculator


Home loans for teachers


There are a number of special programs for teachers to finance and purchase homes, including:


  1. Teacher Next Door

  2. Homes for Heroes

  3. Good Neighbor Next Door

  4. USDA loans

  5. FHA loans

  6. VA loans



1. Teacher Next Door


The Teacher Next Door (TND) program is the largest national home buying program in the United States. Offering both grants and down payment assistance, TND offers grants up to $4,170 or $8,000, depending on your location.


In down payment assistance, teachers may qualify for upwards of $10,000, and may also be able to leverage other benefits too, such as slashed title fees, home appraisal rebates, and access to the Teacher Next Door credit builder program.


Other perks to the program are:


  • Discounted title fees

  • No-cost home appraisals

  • Below market interest rates


One of the most underrated parts of the TND program is that you can use it in conjunction with many other first-time buyer programs, such as:


  1. Freddie Mac Home Possible

  2. Fannie Mae HomeReady


To use the Teacher Next Door program, you'll need to be a pre-K-12th grade teacher. Really the only caveat to the program is that you'll need to work with a participating Teacher Next Door real estate agent.


TND programs are free for you to use, so that mitigates the downside to not selecting your own lender.



2. Homes for Heroes


Pre-K through college certified teachers may use the Homes for Heroes program to save up to $700 for each $100,000 in your home's purchase price. The program will connect you with a local real estate professional in your area. This professional will help you through the homebuying process.


In addition to teachers, Homes for Heroes is also available to:


  • Firefighters

  • EMS

  • Law enforcement

  • Military

  • Healthcare Professionals


Under the terms of Homes for Heroes, qualifying teachers may be able to save on their closing costs, title company expenses, and inspection fees. In fact, the organization boasts that the average program participant saves over $2,400!



3. Good Neighbor Next Door


Another popular option is the Good Neighbor Next Door program. Good Neighbor Next Door helps those in public service careers to become homeowners in an area undergoing community revitalization.


Funded by the United States Department of Housing and Urban Development (HUD), those working in education, law enforcement, firefighting, and similar career paths may be eligible to receive an incredible 50% off the list price of a house.


Here's how the program works.


  • First, you can browse homes for sale through the Good Neighbor Next Door website.


  • Online listings are public for just seven days, at which point the listings will expire. If you're interested in a property, you'll have the option to submit your interest in a particular listing.


  • Once the listing expires, homes with multiple interested parties will be granted to a buyer via a random lottery selection.


  • You'll make a three-year commitment to live in this home (as your primary residence).


  • You'll receive a 50% discount off the home's list price, but you will need to take a silent second mortgage for this other amount. If you fail to meet the three-year commitment you agreed to, then you'll need to repay the entire list price of the home, rather than just 50%.



Finally, in addition to being a teacher (or other eligible career) and maintaining your residency for three years, you'll also need to teach/work in a designated revitalization area.



4. USDA loans


Teachers buying homes in eligible rural areas may be able to take advantage of one of three different USDA mortgage programs:


  • USDA Direct Loans: Lower income borrowers can buy homes with interest rates as low as 1%.

  • USDA Loan Guarantees: Certain lenders offer below market interest rates and up to 100% financing on your home purchase.

  • USDA Home Improvement Loans: Certain homeowners may quality for Home Improvement Loans to renovate for fix problems with their homes.


Interested teachers will need to meet a few eligibility requirements:


  • Be a legal United States citizen, resident, noncitizen national, or permanent resident alien

  • Have a credit score of at least 640

  • Have a debt-to-income ratio of 43% or lower

  • Verify that your home meets location standards

  • Verify that your income qualifies for the USDA program(via Fannie Mae's Area Median Income Lookup Tool)


You'll also need to work with a USDA participating lender.



5. FHA loans


FHA loans can be another great opportunity for educators to buy their first (or subsequent) homes.


Backed by the United States Federal Housing Administration, the FHA program is known for its more relaxed credit score and down payment requirements.


Those with credit scores of at least 580 may be able to secure these special mortgages (again through participating lenders), with down payments of just 3.5%.


Other requirements to take an FHA loan include:


  • A home appraisal must be completed by an FHA-approved appraiser.

  • Using the home as your primary residence

  • A commitment to occupy the property within 60 days

  • A mandatory home inspection


Though FHA mortgages can be a great option for teachers across the country, they do carry pricy mortgage insurance premium expenses: one worth 1.75% of the loan amount, due at closing, and ongoing annual payments of about 0.1% - 0.8% of your loan amount.



6. VA loans


Finally, teachers across the country that are veterans or military spouses may opt to apply for a mortgage loan through the Department of Veterans Affairs. And there are numerous reasons why.


For one, VA loans are typically accompanied by below market financing rates. In most instances, rates could be about 25 basis points (0.25%) lower than Conventional rates.


Additionally, VA loans make it possible to buy a home without any down payment at all, so qualifying teachers without a ton of cash savings can still take part.


Finally, VA loans waive the private mortgage insurance (PMI) requirement that you'd be subject to with Conventional mortgages with under a 20% down payment.



State-sponsored teacher mortgage programs


One last thing that you'll likely want to consider is the availability of any local state, county, or community-based mortgage programs.


There are too many to list here, but organizations such as teacher unions, credit unions, and local governments may also have options out there to help you.


One such example is Connecticut's Teachers Mortgage Program, offered by the Connecticut Housing Finance Agency.


 

No matter which programs, down payment assistance, or grants you utilize to purchase your home, it is nice to see such a wide array of programs designed to help America's educators.



Tips for teachers buying a home


It can be tricky for teachers to afford a home, particularly on a single income. However, here are some tips to help make the homebuying process just a little bit easier.



1. Balance your present and future cash flow


You have other non-housing related expenses.


The good news of being a teacher, particularly if you are a union member, is that your salary steps and future raises tend to be outlined years in advance in your district's contract.


This makes it easier to project how your income and expenses could be different in five years than they are today.


Use this future knowledge to your advantage!


If you know that you'll likely need a car in the next five years but have some extra cash on hand now, for instance, it may make sense to make a larger down payment, which will keep your monthly mortgage payments lower.



2. Consider mortgage programs that meet your needs


If the idea of a low-down payment solution sounds appealing, but you don't like the idea of paying annual mortgage insurance premiums (as is the case with FHA loans), you may consider a Conventional 97 loan or something else altogether.


There is no shortage of mortgage options to consider, whether they are teacher oriented or not.


Finding a lender or loan officer that you trust to help you out here is extremely important. You may consider calling a few in your area that work for both local and national banks, and then evaluate the quality of the service you receive.


And while customer service is important, it is not as crucial as the interest rate you receive, as even a 0.25% difference can add up to thousands of dollars over the life of a 30-year mortgage.



Download our mortgage calculator


Teachers looking to join the ranks of homeownership should download our free mortgage calculator. This tool will help you to:


  • Gauge how much home you can afford

  • See how changes in your down payment, loan rate, term, and other variables will impact your monthly mortgage payments

  • Help you estimate you monthly mortgage payments, including amounts escrowed for property taxes and homeowners insurance


The mortgage calculator is compatible with all sorts of fixed mortgage programs, so we've built the perfect tool for teachers considering Conventional, FHA, USDA, and other mortgage programs!



Conclusion


Using one of these special programs to take a home loan or buy a house as an teacher can make a huge difference in helping you to achieve your dreams.


And while every program has its unique pros and cons, they're all geared towards helping get you in a home sooner!



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About Nathan Zarcaro

Nathan Zarcaro is the founder of The Student Debt Destroyer and is passionate about personal finance related causes.  A 2018 graduate of Providence College's Liberal Arts Honors Program, Nathan studied Finance, and has worked for industry leaders in both finance and healthcare.  In his free time, Nathan enjoys playing golf and traveling with his wife Brigid.

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