Last Updated on January 6, 2022 by Maggie Sutton
As an educator, chances are you qualify for more than one type of home loan for teachers. But, which is the best for you, you finances, and your long term goals? They all have great advantages for first time home buyers and teachers who have already bought and sold more than one home. We have the pros and cons for four of the most common home loan types.
Types of Home Loans for Teachers
# 1: Conventional Loan
Conventional loans are the most common home loan, with over half of all home loans being conventional. Because they are less limiting, there are fewer required fees and shorter terms necessary to qualify, making this a popular home loan program especially for teachers. Conventional loans do not have the backing of the federal government like other loan types will. Instead, conventional loans follow guidelines set by two private agencies, Freddie Mac and Fannie Mae.
Benefits of a Conventional Loans for Teachers:
- The credit score and down payment requirements are usually lower than other loan types.
- There are no upfront funding fees.
- There is a higher loan amount limit than with government backed loans.
- Your down payment can be as low as 3% of the purchase price.
Disadvantages of a Conventional Loan:
- Generally requires a credit score of 620 or higher.
- If you down payment is lower than 20%, you’ll need to pay Private Mortgage Insurance (PMI).
- Guidelines can vary from lender to lender because they are backed by private institutions that can set their own terms instead of the government.
Also, conventional home loans for teachers typically come with 30-year or 15-year duration term. This means by making the required payments each month, you will finish paying off your loan in that amount of years.
#2: FHA Loan
FHA Loans are government-backed loans, issued by the Federal Housing Administration. A government-backed loan is one in which the government will pay the bank back the rest of the money loaned to a borrower if he or she has failed to pay it off and their house enters forbearance. This covers all the following types of loans we’ll cover, which are all backed by the government.
The FHA lowers credit score requirements for home loans, allowing more people to own their house. Teachers with low credit scores may also qualify for these loans, thanks to Mortgage Insurance Premiums (MIP) and the Upfront Funding Fee. These costs help make up the difference in what you’re lacking in credit score. Their small down payment requirement is another appealing feature of these loans, making them ideal for first time home buyers.
Benefits of a FHA Loans for Teachers:
- The FHA uses a credit score of 580 or higher to determine whether or not you qualify for a loan. If teachers have a credit score of 500-579, they may still qualify for an FHA mortgage if they can put down at least 10% for a down payment.
- A 3.5% down payment is all that’s needed for a house purchase.
- Closing costs may be included in the mortgage payment at times, resulting in a lower upfront cost.
Disadvantages of an FHA Loan:
- When you apply for an FHA home loan, you will be charged a Upfront Funding Fee during your closing. This charge is a small percentage of the overall financed amount. This is extra government insurance to cover the risk of your loan in case something goes wrong. Typically, this may be rolled into your mortgage or paid at once at closing.
- All FHA loans must include Mortgage Insurance Premiums (MIP) for the life of the loan. MIP protects the mortgage lender in case you are unable to pay back your loan. This insurance is a major reason why teachers with lower credit scores and less cash available for a down payment can still buy homes.
An FHA home loan for teachers will generally cost a homeowner more money over the life of the loan than a conventional loan, a VA mortgage or USDA loan due to higher interest rates and MIP fees. But, it is still possible for someone with lower down payment funds or credit scores to acquire a house using an FHA home loan.
#3: USDA Loan
USDA loans are not just for farmers. USDA loans are designed to assist a rural community’s development. However, even small towns and outlying regions of metropolitan areas can qualify as rural with these mortgage solutions. These home loans for teachers may be quite beneficial since there is a great need for them in rural locations across the country. Even if you live in a rural area already and are renting, a USDA Home Loan could be a good option for you once you’re ready to buy.
USDA loans are available for households located in designated rural areas that meet all of the eligibility requirements:
- Home buyer must meet income-eligibility. The USDA loan is intended to make homeownership a reality for low to moderate income families in rural areas. The USDA’s low to moderate income guidelines vary by state.
- Home buyer must personally occupy the dwelling as their primary residence.
- Home buyer must be a U.S. Citizen, U.S. non-citizen national or Qualified Alien.
- Must have the legal capacity to incur the loan obligation.
- Must not have been suspended or debarred from participation in federal programs.
- Demonstrate the willingness to meet credit obligations in a timely manner.
Benefits of USDA Loans for Teachers:
- There is an option for no down payment.
- The interest rates on these loans are quite competitive.
- No minimum credit score is required. However, most lenders will need a credit score of 640 or higher. This will vary by lender.
- Available in common fixed-rate terms like 30-year and 15-year loans.
Disadvantages of USDA Loans:
- The Upfront Funding Fee is a one-time charge, ranging from 0.25% to 1% of the total financed amount, that must be paid at closing. This may usually be added to your mortgage payment.
- There is an annual fee as well that can be rolled into your monthly mortgage payments.
- Must meet all the above USDA loan requirements to qualify.
- You must have an inspection of the property. This is to ensure that the home is safe enough for living, which reduces the likelihood of default. If termites are present, for example, the chances that the home will become structurally unsound and unusable go up.
#4: VA Loan
Of all the types of home loans, VA loans are designed exclusively for active and former military members and their families. Backed by the U.S. Department of Veterans Affairs, these loans offer great advantages to those who are serving, or who have served in the U.S. Armed Forces and their spouses.
To obtain a VA loan, you must submit an appropriate Certificate of Eligibility with your application. This documents your conversation with the VA and indicates that you have double-checked with them to ensure that you fulfill the criteria for receiving a VA loan. The primary criteria to qualify is you must have served in the US military for 90 days of active duty during wartime, or 181 days of active duty during peacetime, or you are a surviving spouse of a military member who has also not remarried.
5 Tips to Get a Teacher Mortgage Pre-Approved
- Decide how much home you can afford
- Know your credit history and clean up any issues
- Use a mortgage calculator to determine what you can afford to pay each month, and how it breaks down based on loan type
- Work with a mortgage lender and get pre-approved before you start looking at homes
- Learn about teacher down payment assistance options available in your area
Other Ways to Save with Homes for Heroes
Saving money through our teachers’ home buying program is simple. First, sign up to get in touch with a Homes for Heroes affiliate. There is no obligation once you’ve signed up, just a conversation to see whether you’re looking to buy, sell or refinance a home. We’ll then ask where you’re looking, and get you started on the path to home ownership.
From there, we’ll work with you throughout the home-buying process just as any other real estate professional would. There are no additional hoops to jump through, hidden or upfront fees, or limitations to your home search. Just incredible savings and the highest quality buying experience.
Whether you’re moving across the country or just across the street, we’ll connect you to a Homes for Heroes affiliate in your desired area. Also, keep in mind that savings aren’t limited to home buyers. If you’re looking to sell or refinance your home, Homes for Heroes can save you money as well. If you’re looking to buy and sell a home, you’ll get Hero Rewards on both your transactions, not just buying.
When you use one of our affiliate real estate agents to buy, sell, or refinance your home, you’ll get $700 back for every $100,000 of the purchase price. So, if you buy a home for $300,000, you’d get $2,100 back. This money can be used for anything, like new furniture for your new home, make repairs, or put in savings. It’s yours to do whatever you’d like. On average, our heroes can save $2,400!
Plus, if you work with our mortgage, title, and inspection specialists, you can save $500 on lender fees, $150 on title services, and $50 on a home inspection. We also have deals with companies all over the United States for home and career-related products and services, like moving companies, carpet cleaners, storage containers, and home security. That adds up to thousands of dollars in savings!
Giving Back to Teachers
We don’t just help teachers, educators, and other heroes with their housing transactions. We also have the Homes for Heroes Foundation that gives assistance to heroes across the country in dire need when it comes to housing or emergency aid. Through this Foundation, we have been able to give over $1 Million back to hero communities.
Local Homes for Heroes Specialists are Committed to Teachers
Homes for Heroes, Inc. is the largest nationwide network of affiliate real estate, mortgage, and local business specialists; committed to providing easy ways for heroes to save on a home. Shortly after 9/11, Homes for Heroes, Inc. was established to give back to firefighters, EMS, law enforcement, military (active, reserves & veterans), healthcare professionals and teachers for all they do.
Homes for Heroes has helped over 50,000 educators and other heroes save more than $90 million on their home transactions. Our goal is to thank every hero in the nation for all they do.
If you’re ready to buy a home, let us connect you with a local real estate agent. They’ll be able to answer any questions you have about home loans for teachers and can get the homebuying process started for you.