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Teacher-Friendly Mortgages: Home Financing Solutions That Make the Grade

Venessa Eck,  Sr. Mortgage Advisor

August 21, 2023 — 8 min read

Teacher-Friendly Mortgages

Owning a home is a cherished dream and a significant milestone for clients and their families—especially for those with kids and those who just starting out, it provides stability and a foundation for building a strong financial future.

However, for many teachers and education professionals, this aspiration holds even greater importance; as educators, they’re on the front lines of shaping minds and nurturing the next generation.

The good news is there are specific mortgage options designed to meet the unique needs of our kids’ educators. By taking advantage of these specialized programs, teachers and other education professionals can find affordable financing and lower interest rates and take advantage of down payment assistance.

The Good Neighbor Next Door Program

The Good Neighbor Next Door Program, established by the U.S. Department of Housing and Urban Development (HUD), stands as a beacon of opportunity for teachers and education professionals. This program aims to revitalize designated areas by offering eligible participants a 50 percent discount on HUD homes.

To qualify, educators must meet specific requirements, including being employed full-time as a pre-K through 12th-grade teacher at a public or private school; additionally, they must commit to living in the purchased property as their primary residence for a minimum of three years.

It's important to note that the Good Neighbor Next Door Program has specific application periods and availability can vary depending on the location and availability of HUD homes. Check out additional detail below, or connect with a neighborhood Mortgage Advisor to learn more.

Good Neighbor Next Door: Key Benefits

  • $100 down payment options available with FHA qualification
  • Option to sell the property after 3 years and keep the equity and appreciation
  • Wide range of mortgage products available, including FHA, VA, and Conventional loans
  • Possibility to combine with a renovation loan for additional home improvements

HomeReady Mortgage

One other mortgage option that benefits teachers and education professionals is the HomeReady Mortgage program; this program, offered by Fannie Mae, is designed to make homeownership more accessible for low- to moderate-income borrowers, including educators.

One key advantage of HomeReady is the flexible qualification requirements; it considers non-traditional sources of income, such as room rental income or income from family members living in the same household. This can be beneficial for teachers who may have additional income streams or receive support from family members. Additionally, HomeReady allows for income from non-borrower household members, such as parents or siblings, to be considered when determining loan eligibility.

It also offers a low-down payment option, which can be as little as 3 percent; this is a big perk for education professionals who may have limited savings to put towards a down payment. Like other conventional mortgages, clients have to pay for private mortgage insurance if their down payment is less than 20 percent. However, premiums are reduced for HomeReady-eligible borrowers, which helps keep monthly payments smaller as long as the borrower makes 80% or less of the Area Medium Income (AMI).

RELATED: How to Remove PMI: Everything You Need to Know

HomeReady does provide education and support to borrowers, including a required online homeownership education course. This course helps borrowers gain a better understanding of the home-buying process, financial management, and responsibilities associated with homeownership. Click here to learn more.

Teacher-Friendly Mortgages

HomePossible Mortgage

Offered by Freddie Mac, the HomePossible Mortgage program targets low- to moderate-income borrowers, including educators, searching for a more accessible path to homeownership. While HomePossible shares some similarities with HomeReady, such as flexible down payment options and reduced private mortgage insurance (PMI) premiums, there are noteworthy differences.

One key difference lies in the credit score requirements. HomePossible sets a minimum credit score guideline of 660 for purchase transactions; if a client’s credit score falls between 620 and 660, HomeReady may be the better choice.

It's crucial to encourage clients to consult with mortgage lenders offering both programs to determine which aligns best with their finances and long-term goals. Click here to connect with a neighborhood Mortgage Advisor today.

Furthermore, HomePossible introduces alternative options for borrowers with limited credit history. While some programs require a traditional credit score, HomePossible recognizes non-traditional credit sources, such as rent payments, utility bills, and other financial obligations. This broadens the eligibility scope, accommodating individuals who may not possess a traditional credit score.

RELATED: How to Get a Mortgage While Building Credit: Tips for First-Time Buyers

Similar to HomeReady, HomePossible also emphasizes the importance of education and support. Borrowers are required to complete an online homeownership education course. This ensures that borrowers are well-informed and equipped to navigate the complexities of homeownership confidently. Click here to learn more.

Dream Home 100% Financing Program

PacRes Mortgage designed its Dream Home 100% Financing Program to help home buyers—including teachers and other education professionals—clear the down payment hurdle to achieve their homeownership dream in a responsible, sustainable way.

Borrowers have the option to choose from different down payment assistance programs, allowing them to tailor the down payment amount to their specific financial situation; this flexibility is extremely beneficial for educators and other individuals with limited savings, as it helps reduce the upfront costs associated with purchasing a home.

It also considers the unique challenges faced by borrowers with less-than-perfect credit histories. While credit requirements may still apply, this program offers options for individuals who may have experienced past financial setbacks or have a limited credit history.

Dream Home 100% Financing Program: Key Benefits

  • 600 minimum credit score*
  • In-house underwriting
  • 3.5 percent down payment requirement covered by secondary financing from a government entity**
  • Not restricted to first-time homebuyers
  • Property types include single-family residential, townhomes, duplexes, Manufactured homes, and HUD-approved condos
  • No geographic restrictions, available in all states except New York
Teacher-Friendly Mortgages

Federal Housing Administration (FHA) loans

FHA loans, a popular choice for many first-time homebuyers, offer distinct advantages that may make homeownership more attainable for teachers and education professionals. These government-backed loans are insured by FHA, providing lenders with an added layer of protection, which allows for more favorable terms and conditions for borrowers.

One of the primary potential advantages for teachers is the flexible qualification requirements. Unlike traditional mortgages, FHA loans consider a range of factors beyond credit scores. This flexibility is beneficial for educators who may have student loan debt or limited credit history due to prioritizing their education and career. These loans often consider alternative credit sources, such as rent and utility payments, allowing teachers to showcase their financial responsibility in alternative manners and increase their chances of loan approval.

RELATED: Is an FHA Loan Right for Me? What You Need to Know

Additionally, FHA loans offer lower down payment options. While conventional loans typically require a down payment of up to 20 percent, FHA loans may only require a down payment of as little as 3.5 percent; this reduced upfront cost can make a significant difference, providing educators with more flexibility in choosing a home that meets their specific needs and preferences.

State-Specific Programs

Many states also offer special mortgage programs to support and recognize the importance of teachers and education professionals. To take full advantage of these state-specific programs, it's crucial for teachers and education professionals to research the options available in their respective states. To get started, clients can visit their state's housing agency website or reach out to speak with their neighborhood Mortgage Advisor today.

House Hunt at Your Own Pace with RateSafe

Life as an educator is busy and it may take your client some time to find the perfect home loan. Luckily, with RateSafe, borrowers can lock in today’s interest rate for up to 120 days* , providing much-needed peace of mind and time to comb through all available options. This option does not apply to all loans.

RELATED: How to Lock-In a Low Interest Rate Today

Once the rate lock is in place, your client’s rate will remain the same despite rate increases or decreases in the market. However, they can take advantage of a one-time float-down option. Click here to learn more.

*Speak with a financial advisor or licensed Mortgage Advisor before making any long-term decisions. The RateSafe lock is only valid until the expiration date. If the lock expires, the rate is subject to change. In the event the loan does not fund on or before the lock expiration date, the loan must be re-locked at current pricing.

**Your rate could potentially change based on specific changes of circumstances, such as changes in LTV or credit score. Locking your interest rate does not constitute loan approval.

*Credit scores less than 620 require AUS approval

*Speak with a financial advisor or licensed Mortgage Advisor before making any long-term decisions.

**Income and credit restrictions apply

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