Last Updated on July 28, 2023 by Luke Feldbrugge
A worthwhile teacher mortgage program can help your search for a new home, or your next home, immeasurably. There are a ton of moving parts in a home search – offers, counteroffers, appraisals, inspections, closings – but none is more central than applying for and being approved for…the mortgage. It’s a complicated contract, and it’s a loan you will be living with for a long time. Your monthly mortgage payment will become a central part of your budget, so you want to do it right. Don’t panic. There’s help.
There are six teacher mortgage programs out there that can help you save money up front and over time. Three are teacher-specific in that they are designed to help teachers find and afford a home. The other three are federally-sponsored programs that educators can use, if the circumstances line up, to get a mortgage at significant savings.
1) HUD Good Neighbor Next Door Teacher Mortgage Program
This one is technically not a teacher mortgage program, but it sort of is. It’s somewhat complicated, but the important thing to note about this program is that it has 50 percent discounts on certain houses and properties. These discounts are only available to certain eligible candidates, such as teachers. If that seems like a dramatic offer, it is.
This is a national program from the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). One of its goals is to make the home purchase more affordable for:
- Law Enforcement
The eligible homes in the Good Neighbor Next Door program are in revitalization areas as identified by HUD. That means they are in locations where:
- Household incomes are lower than average.
- Homeownership is lower than average.
- Foreclosure activity is higher than the surrounding community.
These neighborhoods require both economic and community development, and one way to encourage that is to make foreclosed properties available to heroes at a half-off. If you get one of these deeply-discounted homes, you need to agree to live there for at least three years.
With the Good Neighbor Next Door program, the properties that are going up for sale are offered to the Good Neighbor eligible applicants seven days before they go on the general market.
2) Homes for Heroes Teacher Mortgage Program
At Homes for Heroes, we have a nationwide network in all 50 states of licensed real estate agents and mortgage loan officers and originators who joined our program specifically to assist their local teachers, educators, and other community service heroes buy, sell and refinance a home. And, when teachers use Homes for Heroes local specialists to close on a home, they (you) can save an average of $3,000 when they buy or sell a home, and an average of $6,000 when they do both! It’s our way to say thank you for their service to the community and our country.
In terms of finding a good mortgage, our mortgage brokers are a particularly important part of the equation. When working with any of these teacher mortgage programs (especially the federally sponsored systems listed below), having a private lender that is easy to work with cannot be stressed enough. Your relationship with your mortgage company will extend for decades. Our private mortgage specialists have committed themselves to thanking community heroes – teachers, healthcare workers, firefighters, military (active duty, reserves and veterans), law enforcement professionals and first responders. Specifically, this is how Homes for Heroes assists teachers and educators with buying, selling or refinancing.
“Our real estate agent was very thoughtful and patient, helping us decide on a house. She was responsive to our questions and concerns. House buying is not an easy process. However our real estate agent made the process understandable and simple. – Jayna & Elin are teachers that found a house in Florida.
“Our real estate agent was fantastic to work with! She made every step of the home buying process simple and helped keep our minds at ease. Her dedication to helping others was very evident – we highly recommend Homes for Heroes.” – Eric and Taylor are teachers who purchased a house in Wisconsin.
Get started by completing our online form, and a member of our team will contact you to learn how we can best serve you. When you’re ready to begin the home buying, selling, or refinancing process, we will connect you with our local real estate or mortgage specialists in your desired location. From there, our local Homes for Heroes specialists will be with you every step of the way and save you significant money in the process.
3) The HELPER Act
One teacher mortgage program that is not yet in place has a great deal of potential for educators. It’s called the HELPER Act, and it is currently a bill being considered by Congress. The title stands for: Homes for Every Local Protector, Educator and Responder. It is being compared to VA loans, but it would provide loan guarantees for school employees and classroom teachers. It’s benefits would include:
- No down payments for a mortgage
- No private mortgage insurance
Those two benefits alone will save you thousands of dollars up front and over the life of your mortgage. Although it allows you to skip monthly private mortgage insurance premiums (PMI), there would be one up front 3.6% fee involved in guaranteeing your loan.
The bill has bi-partisan support in both the House and Senate, and President Biden also supports it. If you are a teacher, educator or school employee, this is a bright spot in an otherwise tough housing market. The bill is still waiting for action in the House Committee on Financial Services. You may want to contact your legislators to encourage them to support this effort.
Federal Teacher Mortgage Programs: The Big Three
Before we dig into these federal teacher mortgage programs, we should set the record straight. Although these programs are all called “loans,” they are actually loan guarantees. That means these federal agencies will stand behind your loan and insure it. The actual money, however, comes from private lenders, mortgage brokers and banks.
Getting approval from the federal government is half of a two-part process. The other half is being approved for the mortgage with your lender. Of course, when the federal government backs your application for a loan, it can add a lot of credibility to your request in the eyes of private mortgage lenders.
In almost all cases, these federal programs are loan guarantees that insure your mortgage if you should default on payments.
4) The FHA Loan Program
The FHA loan guarantees are for low to moderate-income earners who also have low credit scores. The low down payment rules and relaxed credit requirements make the FHA loan guarantee a good deal for educators who are searching for affordable housing.
Here are some of the benefits of the FHA loan guarantee:
- Small Down payments – The FHA has a minimum down payment of 3.5% of the total home loan. Typical mortgages require up to 20%. Your down payment percentage may vary if you have a credit score below 580.
- Low Credit Scores – If you have a low credit score and cannot get a loan from conventional lenders, the FHA loan was designed with you in mind.
- Assumable – FHA loans are assumable. An assumable loan lets you sign your current mortgage over to a potential buyer without much of the paperwork and application processes. In addition, they assume your loan at the interest rate you locked in when you bought your house. That becomes a significant advantage for a seller in a real estate market where interest rates have gone up dramatically (like this year).
- Not just First Time Home Buyers – the FHA program is for all home buyers who qualify.
The FHA system does require some fees at closing:
- The Upfront Funding Fee will cost you 1.75% of the total financed amount. It’s paid at closing, but it can be rolled into the mortgage and paid over time. This is a one-time fee.
- The Mortgage Insurance Premiums is a fee you will be paying annually for the life of the loan. The current rate for MIP is 0.55%. This too can be rolled into your monthly mortgage payments.
5) The USDA Loan Program
USDA loans are part of a national program for anyone who wishes to buy a home in a rural area. The agency defines “rural” as a town with less than 35,000 people and it includes 97% of the United States. You may be rural right now and not even know it.
The USDA Loan program has benefits that include:
- No down payment–that’s the big one. Most mortgages require extensive down payments.
- USDA home loans have fixed interest rates.
- USDA loans do not technically have a credit score minimum. However, most lenders will ask for a score around 640.
- You can use a USDA home loan to build a new home or buy an existing home. You can also use the money to rehab, renovate or move an existing home.
- It’s not only for first-time homebuyers. Anyone looking for single-family homes in rural areas should check into these loan guarantees.
- USDA loans are assumable.
This loan guarantee also has some fees, much like the USDA. This loan insurance has an upfront guarantee fee that costs 1% of the loan. Then it has an annual fee that costs 0.35% of the loan amount. There are also upper income limits on these loans.
Since about a third of all teachers in the U.S. (32%) work in rural schools, this program may be a good resource for educators, teachers and school administrators.
6) The VA Loan Guarantee
The VA loan guarantee, if you are eligible, is probably the best of the federal mortgage programs out there in terms of benefits. Of course, you need to be a veteran, an active duty service member, a Reservist or a member of the National Guard. If you are a veteran who is now a teacher, it’s really worth checking out. The benefits of a VA loan guarantee eclipse the other programs quite a bit. The big three advantages are:
- No down payments
- No private mortgage insurance
- Lower interest rates
Other benefits include:
- The VA loan guarantee will limit your maximum closing costs.
- There is no minimum credit score required from the VA (but your private lender may have a minimum.
- You do not have to be a first-time home buyer to use a VA loan guarantee.
- You can reuse the benefit throughout your lifetime and can even have two VA loans at the same time if you are careful.
- Your VA home loan is assumable.
- There is no maximum loan amount, however the VA does limit its guarantee.
- The VA does not have a maximum debt-to-income (DTI) ratio requirement.
- If you have a bankruptcy or foreclosure in the past, you aren’t automatically disqualified from a VA loan. If your foreclosure or bankruptcy was more than a year ago, you could be eligible.
- The VA home loan benefit can be used for single-family homes (up to four units), condos, manufactured homes, new builds and home improvements like solar panels.
- VA Loans may also be used by the surviving spouses of service members or veterans killed in the line of duty.
In terms of closing fees, there is the VA Funding fee. For the first time home buyer, the agency lowers its funding fee (2.15% of the total loan). The VA funding fee is a one-time fee you pay to get the VA loan, but it can be rolled into your monthly mortgage payments. The funding fee is also waived for veterans with service-related injuries, disabilities or recipients of the Purple Heart.
The primary criteria to qualify for VA home loans 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. For Reservists and National Guard, it’s six years of service or 90 days if you were mobilized for active duty.
Don’t Forget Conventional Loans
The requirements, rules, fees and eligibility factors of a teacher mortgage program may convince you to choose a conventional mortgage loan. That’s not a bad thing. Conventional mortgages are the standard by which we measure the other teacher mortgage programs. To their credit, conventional mortgages are pretty straight forward, have few limits and are accessible to most people–teachers included. You can also shop around for the best mortgage deal with different lenders and brokers. If they don’t seem eager for your business, find a lender who is.
$3,000 Average Savings with Homes for Heroes
Homes for Heroes can help you with any of these teacher mortgage programs. In the case of federal programs (FHA, USDA and VA), we can line you up with our mortgage specialist in your area who understands how these programs work. In the case of the Good Neighbor Next Door program, our mortgage specialist can help you with each step in the process. If you are going with a conventional loan, our mortgage specialist can help with that too. In fact, that’s their bread and butter.
If you’re a teacher thinking about moving and want a new home, consider speaking with our real estate specialist in your area. They will answer your questions, and provide you with expert knowledge and experience for your next home purchase.
Simply sign up today and a member of our team will follow up with you to determine how we can best serve your needs. And, if you choose to work with our local specialists and end up closing on a home, you could save an average of $3,000 if you buy, or $6,000 if you buy and sell! It’s our way to say thank you.