Last Updated on June 15, 2021 by Maggie Looker
Trying to buy a home as an educator can seem challenging. After a demanding day at work, the last thing you’d like to do is think about what it takes to own a home. There’s also the added pressure and stress to come up with a large down payment. Luckily, there are several educator mortgage programs to save you money on your down payment and closing costs.
Low and Zero Down Payment Loans
There are several programs for home buying and down payment assistance for educators. There are different loans, national programs, grants, tax credits, and even discounts and deals from real estate agents and lenders. Sometimes it can be hard to even know where to begin!
A great place to start is to familiarize yourself with the different home mortgage loans available to educators. There are multiple types of loans that require little to no money in a down payment, which can be great for first time home buyers or someone who doesn’t have a lot of cash on hand to make a large down payment.
FHA loans, for example, require as low as 3.5% for a down payment with good credit scores. Even if you have a lower credit score, FHA loans only require up to 10% for a down payment with a credit score as low as 500. So a down payment at 3.5% on a $200,000 home could be as low as $7,000.
Sometimes, you can even roll closing costs into your loan. When you roll a fee or cost into your loan, that just means that the sum will be added to your loan amount. Instead of paying it all at once at closing, you’ll pay those fees and costs over the course of the loan. That means you’ll need even less cash at your closing. You can discuss with your mortgage lender what your options are for rolling costs and fees.
Benefits of FHA Home Loans for Educators:
- Educators with a credit score of 580 or higher can qualify for a FHA loan. Scores as low as 500 can be accepted, depending on the lender.
- Home buyers can put down as little as 3.5% for a down payment. If an educator has a credit score of 500-579, they may still qualify for an FHA home loan.
- Closing costs can sometimes be rolled into the mortgage payment, meaning you’ll pay less up front.
Another beneficial educator mortgage program when it comes to down payment is the USDA loan. USDA home loans do not require a down payment, so you can instantly save on a home purchase using this type of loan. This mortgage is designed for people living in or moving to rural areas, defined by the USDA as a town or city up to 35,000 people as rural. Since this is a mortgage backed by the government, there are several requirements to meet to be eligible. But, there are many benefits if you qualify.
One of the main qualifications for a USDA loan are the income guidelines, set by the USDA. You must make a certain amount of money to be qualified for a loan from a lender, but in the case of a USDA home loan, you also can not make more than a certain amount of household income, dependent on your county.
By far the best benefit of a USDA loan is that there is no down payment requirement. The loan amount you can request can be 100% of the home purchase price. Second, there is technically no minimum credit requirement from the government, but your lender typically will have a minimum credit score for this type of loan. Generally, a credit score of 640 or better is more favorable to. Lastly, you can use a USDA loan to build a new home in a rural area, you do not need to use it on an existing home.
Benefits of USDA Home Loans for Educators:
- No down payment.
- Competitive interest rates.
- Since there is technically no minimum credit score to qualify, credit guidelines can be flexible.
- Loan terms are available in common fixed-rate terms like 30-year and 15-year loans.
- The income guidelines are based on the income of all adults who will be living in the home.
Down Payment Assistance Programs
First Time Home Buyer Class
Another great educator mortgage program available is a first time home buyer class. These classes are designed to go over things like understanding your finances, creating budgets, the process of buying and closing on a house, and steps along the way like getting a home inspection and buying homeowners insurance. Many first time home buyer classes also talk about great down payment programs specific to your location through these classes.
Some times certain lenders strongly encourage that you attend these classes, but the are not necessarily required. You can find classes at the city, county, and state level, depending on where you’re looking to buy your home. There are also several programs funded at the state level by the federal government. The United States Department of Housing and Urban Development, or HUD, have funds they distribute to states to use on their various programs.
Down Payment Resource
Also, a great program to look into for down payment assistance if you’re an educator is through Down Payment Resource. This is a comprehensive, online database of down payment assistance programs. You can enter your information, including that you’re an educator, to see the programs and financial assistance available to you. Down Payment Resource has approximately 2,300 programs in their database, and they automatically match you with.
Department of Housing and Urban Development
The United States Department of Housing and Urban Development, or HUD, distributes funding to states to use through their various programs, like first time home buyer classes. But, HUD also has another program that is specific for educators, teachers, and school administrators. The Good Neighbor Next Door Program is designed to revitalize neighborhoods in every state. The homes available in the Good Neighbor Next Door program can be purchased at 50% of their list price.
When you buy a home through the Good Neighbor Next Door program, you put an offer on one of their program-approved homes for the full list price. Then, your mortgage lender breaks your mortgage into two equal mortgages. Then, you only need to pay back one of these loans, or 50% of the purchase price. You will not need to pay payments or interest on the other loan. You just need to live in the home as your primary residence, and don’t sell it for at least 36 months.
To qualify for this home program, you need to be eligibly employed as an educator or teacher. The house you put an offer on must also be one of the houses that HUD has identified as eligible. You can find the list of houses per state on the Good Neighbor Next Door website.
Homes for Heroes Educator Mortgage Program
If you qualify for down payment assistance and are able to get an FHA or USDA loan, there are even more savings out there for an educator like you! Homes for Heroes mortgage program has helped over 43,000 educators and other heroes save over $75 million on their home transactions. We do this by giving back Hero Rewards after your home closing.
When you use one of our affiliate real estate agents to buy and/or sell your home, you’ll get 0.7% of the purchase price back as a check. So, if you buy a home for $200,000, you’d get $1,400 back. 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. On average, our education heroes save $2,400!
We also have partnerships with local and national companies to provide you savings on moving and your new home. Discounts on home security systems, moving companies, home improvement, and even deals on clothing can be found on our deals page.
Sign up now to talk to a Homes for Heroes agent. There is no obligation, cost, or extra paperwork for you. You can also get Hero Rewards regardless of the down payment assistance or type of loan you use.