Home Buying Programs for Teachers

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Contributor, Benzinga
September 27, 2023

As an educator, you have access to specialized home loan options that can make the dream of homeownership more achievable. A teacher home-buying program can help you gain access to more affordable properties currently on the market, save more money in a down payment or access a loan with less strict criteria. Read on to learn more about how teachers can take advantage of special home-buying offers and programs to access more affordable housing. 

Best Home Buying Programs for Teachers

As a teacher, you might need a bit of help affording your first home. A number of federal and local homeownership program options exist for teachers and education professionals. If you’re a first-time home buyer and a teacher, the following programs and options are available to make buying a home easier. 

Teacher Next Door

The Teacher Next Door program has been tailored to make the home-buying process easier for teachers certified for pre-K through grade 12 instruction. If you qualify as a homebuyer, you could receive up to $8,000 in a grant towards your down payment if you’re buying your first home and you plan to live in the property full-time. If you do not qualify for a grant, the Teacher Next Door program can also help you access a personal loan with an exceptionally low interest rate to cover payments you may not have considered —  for example, closing costs.

The Teacher Next Door program can be a good place to begin your search for a teacher mortgage if you aren’t yet sure which type of mortgage you want. Program representatives can assist you in finding lenders with qualification criteria that you meet and can provide assistance in filing your loan paperwork. 

Good Neighbor Next Door

If you don’t have a home in mind that you think you might be interested in purchasing, you may be able to see significant savings on your mortgage with the Good Neighbor Next Door program. Good Neighbor Next Door was developed to help public servants like teachers, emergency medical technicians and firefighters find more affordable housing. The program is run by the United States Department of Housing and Urban Development (HUD).

Each year, HUD sells hundreds of foreclosed properties through the Good Neighbor Next Door program to qualifying homebuyer applicants. The homes for sale are usually located in rural or suburban areas undergoing continuing economic development. While these homes are usually not in pristine condition, they are sold at up to 50% off the foreclosed rate to encourage short sales. To make homes even more affordable, select applicants can qualify for an FHA loan with a $100 down payment when moving into their homes. 

Government-Backed Mortgage Loans

While the programs listed above can be invaluable resources that can make the dream of homeownership more affordable for teachers, they are not loans themselves. For example, homes sold at a discount through the HUD’s homeownership program will still require a mortgage loan for most buyers to afford. Teachers looking for more flexible qualification criteria or who do not qualify for a conventional loan may want to explore government-backed teacher mortgage loan options.

Government-backed mortgage loans come with insurance from the federal government. If you default on your home loan, the lender will not be left on the hook for the loss of your full loan value. Lenders can offer more home loans to a wider pool of homebuyer applicants because applicants with fewer qualifications are less risky candidates when compared to loans without this insurance.

You can access multiple types of government-backed loans, and teachers may qualify for any of the following types of loans.

  • FHA loans: FHA loans are mortgage loans for borrowers who may have negative marks on their credit reports or who have a lower credit score. With an FHA loan, you may be able to buy a home with as little as 3.5% down while also avoiding the private mortgage insurance requirement.
  • USDA loans: If you’re looking to buy a home in a rural area, the USDA program can help you buy a home with a $0 down payment. To qualify, you must meet income requirements based on your home’s location, and you cannot earn significantly more than what the USDA has determined is the median income for your area. Your home must also be located in a rural or suburban area as defined by the USDA.
  • VA loans: If you’ve served in the United States Armed Forces, a VA loan can be one of your most affordable routes to homeownership. With a VA loan, you can purchase a home with no down payment and a low one-time funding fee. You also don’t need to purchase private mortgage insurance, even if you have a down payment of less than 20%. You must meet service requirements in order to get a VA loan.

Individual lenders issuing government-backed mortgage loans may have additional requirements, which might vary between providers. As a general rule, government-backed loans provide more accessible options when it comes to home buying for teachers, making them a strong option for those with credit scores below 640. 

Benefits of Home Buying Programs for Teachers

If you’re an educator, you could experience a number of reasons why you might need assistance buying a home. Home prices have been on a steady incline in the past two years alone, while wages for teachers have largely remained stagnant. The National Housing Conference has reported that increases in home prices may be a major contributing factor to the country’s teacher shortage, especially in areas with high property values. The best mortgage for teachers can provide you the necessary downpayment assistance and closing assistance.

Home-buying programs for teachers can make property ownership possible in a number of ways, including the following.

  • Grants: Programs like Teacher Next Door may provide you with grant funds to use towards your down payment. Unlike a loan, grants are similar to gifts because you do not have to pay them back. This can be a major benefit for teachers on limited incomes.
  • More affordable properties: Many teachers struggle with the prospect of homeownership because of rising home values. Programs like Good Neighbor Next Door can provide teachers with the option to buy a home at up to 50% off the previous value determined by the HUD.
  • More accessible loans: Teachers are likely to qualify for government-backed mortgage loans with income restrictions and limitations — like a USDA loan. These loans can help teachers who do not have thousands of dollars in savings buy a home. 

Helping Teachers Prepare for a Mortgage

While grant and loan programs are excellent places for teachers to get assistance buying their first homes, there are some steps you can take on an individual level to improve your application.

  • Check your credit report: One of the first things you should do when applying for a mortgage is to check your credit report to search for errant items. If you find a late payment or product that you don’t recognize, report it to the bureau issuing the credit report. If they cannot find proof of the item, they must remove it, which is likely to increase your overall credit score.
  • Pay down debt: Your debt-to-income (DTI) ratio is the percentage of your monthly household income that goes towards outstanding debt obligations. Taking some time to pay down outstanding debts before applying for a mortgage loan improves your chances of securing financing.
  • Save a larger down payment: If you can wait to buy a home until you have at least a 20% down payment, you can avoid private mortgage insurance charges on conventional loans. Avoiding this insurance charge can save you hundreds of dollars monthly on your premium payments. If you have a credit score below 540, you may also be able to qualify for an FHA loan with a 10% down payment. 

Compare Mortgage Loans for Teachers

Benzinga offers reviews and insights on the following mortgage lenders. Consider continuing your search here. 

Frequently Asked Questions

Q

Are home loans for teachers worth it?

A

Home loans for teachers are worth it, as investing in property has been a historically consistent way to grow personal wealth. Teachers who are having trouble qualifying for a conventional mortgage loan may want to consider a government-backed mortgage loan. 

Q

Can teachers qualify for a VA loan?

A

Yes, teachers can qualify for a VA loan if they meet all of the criteria that those in other professions must meet in order to get this type of loan. This means that a teacher must have a service history to get a VA loan.  

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About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.