Income and down payment requirements can make buying a first home challenging. Teachers may have difficulty meeting mortgage lenders’ debt-to-income ratios or coming up with 20 percent of the home’s purchase price to put down. On top of this, homebuyers pay closing costs to cover loan and transaction fees. Teachers can get extra help from the federal government as well as non-profit organizations to offset the cost of buying a home.
Loans vs. Grants
Generally, borrowers who can’t afford to pay the full price of a home out of pocket seek financing from conventional mortgage lenders, such as banks and other mortgage lending institutions. Buyers contribute a portion of the purchase price–a down payment–to obtain a loan. A grant is “free” money which teachers can use to pay all or a portion of their homebuying expenses. Some federal, state and local governments offer grants and other forms of monetary assistance to help certain professionals achieve homeownership. Grants, like loans, have specific income, asset, employment and property use guidelines.
Gifts for Everyday Heroes
The Everyday Hero Housing Assistance Fund (EHHAF) reports that less than one-third of community-based professionals–including teachers–own their homes. EHHAF cites high student loan debt as one obstacle. The organization obtains donations from “patriotic companies and individuals,” according to its website. It gifts money to qualified buyers for closing costs, and charges no administrative fees. Buyers work with the organization’s real estate agents and loan professionals to negotiate the purchase, including a seller credit for a portion of the buyer’s closing costs. Teachers must cover their earnest money deposit, inspection fees and the down payment–usually 3.5 percent of the sale price for a Federal Housing Administration’s mortgage insurance program. Teachers with Veterans Affairs benefits, or those buying in qualified rural areas, may qualify for no-down-payment loans.
Teachers Make Good Neighbors
The Department of Housing and Urban Development (HUD) offers teachers a deep discount on HUD-owned homes in revitalization areas. The Good Neighbor Next Door Program allows pre-kindergarten through grade 12 teachers to receive a 50 percent discount on a HUD-foreclosed home’s list price. Teachers commit to living in the house for at least three years and must repay a proportionate amount of the discount based on the time they live in the home–if they sell or move out sooner. Teachers, unlike most professionals who qualify for the program, are limited to buying HUD homes in the areas their employers serve. HUD home inventory is limited, and in the event of multiple offers, HUD chooses the winning offer randomly, by lottery. Buyers pay their own portion of closing costs plus any required down payment.
Classes and Extra Credit
Teachers must meet credit score requirements for the conventional loan or government-backed loan program used to finance the purchase. The FHA requires a 500 minimum score with 10 percent down, or 3.5 percent with at least a 580 credit score. However, FHA lenders may impose more stringent credit score guidelines, such as 640, to qualify for a 3.5 percent down payment. HUD also requires teachers to complete an approved homebuyer education class as part of the Good Neighbor Next Door Program.