Home loans for teachers: 8 programs with big savings

Home loans for teachers: 8 programs with big savings

Find out which teacher home loans make the grade

So-called “teacher home loans” make it easier for educators to buy houses, especially on a moderate income.

These programs typically have lower mortgage rates and low down payments. They might even offer assistance with your down payment and/or closing costs.

In short, home loans for teachers can be an exceptionally good deal. The question is, which one is right for you?

Verify your home buying eligibility (Aug 23rd, 2020)

8 home loans for teachers 

  1. Good Neighbor Next Door 
  2. Teacher Next Door 
  3. Teacher Next Door’s Fresh Start program
  4. Homes for Heroes 
  5. Educator mortgage program 
  6. UFT mortgage deals 
  7. Down payment assistance 
  8. Local home loan programs for teachers 

Other options for teachers: Standard mortgage programs

1. “Good Neighbor Next Door” mortgage

Perhaps the most valuable of all educator mortgage programs is the Good Neighbor Next Door program — which can help teachers save up to 50% on certain home purchases.  

Good Neighbor Next Door offers up to 50% off the list price on HUD foreclosure homes. However, that applies only if you want to buy in a “revitalization area,” as defined by HUD.

>> Related: HUD homes: The best deal you’ve never heard of

To qualify as an educator for this program, you need to be a pre-Kindergarten through 12th-grade teacher. And you must agree to live in the home for at least 36 months.

Good Neighbor Next Door helps law enforcement officers, firefighters, and EMTs as well as teachers. And the U.S. Department of Housing and Urban Development (HUD) runs the program. So you know you can trust it.

Want to find homes that are currently available with this program in your area? Use HUD’s look-up tool.

2. Teacher Next Door mortgage

Teacher Next Door is another HUD-managed program. As the name implies, this loan is tailored to educators — though some other public servants have recently gained access to it. 

Teacher Next Door helps by introducing you to federal, state and local programs that provide assistance to those seeking home loans and discounts. 

For example, you may be in line for a grant (an outright “gift” rather than a loan) that could cover all or some of your closing costs. Teacher next Door would help you find and gain access to the grant. 

And there are other benefits potentially available:

  1. Down payment assistance — When your savings aren’t enough to cover the down payment you need, a program could step in with a grant or loan (with an ultra low interest rate) that might get you over the line
  2. First-time buyer help — If you’re a first-time buyer (meaning you haven’t owned your own home within the last three years), you could be in line for even more assistance. Some can even buy with no money down at all
  3. No fees — No application fees or other upfront costs

Teacher Next Door will also assist you with your loan application, helping to streamline the process by working with you on your purchase, financing, and closing paperwork. 

Is Teacher Next Door legit?

Some worry that the Teacher Next Door program is too good to be true. They think it must be some sort of scam.

But it isn’t. It’s run by the federal government. And it mostly introduces teachers to other programs that should benefit them. 

Read about:   Quicken Loans father or mother firm's inventory skyrockets -- CEO weighs in on rising charges

3. Teacher Next Door Fresh Start program

If you have a troubled credit history, the Fresh Start program, which is part of Teacher Next Door, might help you get the mortgage you want. As its website says:

“[Fresh Start] will discover exactly what credit challenges are preventing your mortgage loan from being approved and help you overcome these issues as quickly and efficiently as possible. 

“This service has proven to be extremely effective in helping buyers raise their credit scores and make home ownership a reality. Consultations are FREE.” 

4. Homes for Heroes

Homes for Heroes is a nationwide network of real estate, mortgage, and local business professionals that offer home loan discounts to select buyers. “On average,” says the program website,” heroes save $2,400 when they buy or sell a home with Homes for Heroes.”

Although it started out in response to 9/11 as a way of honoring first responders, it soon added teachers to its list of heroes.

Essentially, affiliate lenders and real estate professionals offer discounted fees and costs to teacher members. So you have to enroll and then use a professional who’s within the network. But those savings can add up. 

Home for Heroes estimates that you could save $1,050 when buying a home for $50,000 — and savings increase as the purchase price goes up.

So if you’re eligible, it’s worth looking for Homes for Heroes affiliates in your area who could help you save. 

5. Educator Mortgage Program

Mortgage lender Supreme Lending runs a special Educator Mortgage Program. This can help reduce your closing costs and real estate agent fees by up to $800 apiece — or $1,600 in total savings. 

It’s important to note you cannot use this offer in conjunction with a down payment assistance (DPA) program. But if you’re not using DPA, it may be worth looking into the Educator Mortgage Program.

Just make sure you compare Supreme’s overall rate and costs with other lenders. You may be able to save more than $1,600 with another lender if it has significantly lower rates and fees in the first place. 

6. UFT mortgage deals

If you’re a member of the United Federation of Teachers, you may be eligible for special treatment from certain private lenders. You can find them and details of their offers on the union’s website.

Some lenders offer reduced mortgage rates and mortgage insurance premiums to UFT members. And others may provide closing cost grants of up to $7,500. 

It’s certainly worth seeing if any UFT-affiliated lenders meet your needs.

7. Down payment assistance programs

Meanwhile, lots of other organizations offer assistance for would-be homeowners, regardless of occupation. These are called down payment assistance (DPA) programs. DPA programs often run by federal, state and local governments, charities, and nonprofits.

The Teacher Next Door program should put you in touch with DPAs local to you. But, if you prefer, you can approach them directly. 

There are thousands of DPA programs across the country. Each has its own rules about who’s eligible for help. So use the resource below to find out what’s available in your state and which assistance programs you might qualify for. 

Read about:   Underwriting Fees

>> Related: Complete guide to down payment assistance in the U.S. 

8. Local programs providing home loans for teachers

Some states have problems recruiting or retaining teachers. A number of those states offer special mortgage programs as an incentive for teachers to move to the area.  

These tend to fall under the category of down payment assistance — but may be more generous than other DPA programs available to the general population. For instance, you might get additional tax credits or grants. 

Again, Teacher Next Door should be able to put you in touch with your local program, assuming there is one.

Housing affordability for teachers in top metros

Source: Redfin

You may not need a special mortgage

Not all teachers will do better with a special “for-educators” mortgage. That’s because certain programs are already so generous, they could trump the other benefits provided by a teacher home loan. A few examples include VA and USDA mortgages (which offer zero down payment and low rates for qualified borrowers), and low-down options from FHA, Fannie Mae, and Freddie Mac. 

VA and USDA loans

If you’re a veteran and teacher, a VA home loan is hard to beat. You won’t need a down payment. And you’re likely to get a great mortgage rate.

In addition, VA loans have no continuing mortgage insurance — even with low or no down payment. That’s a big perk over other affordable loans like FHA and USDA.

>> Related: The 10 biggest benefits of a VA home loan

Similarly, a mortgage backed by the United States Department of Agriculture (a USDA loan) can be perfect. 

USDA loans also let you buy with no down payment. And they offer lower interest rates and mortgage insurance rates than most other loan types. 

>> Related: USDA loan rates and requirements for [current year]

For a USDA mortgage, eligibility depends on where you’re buying: it needs to be somewhere sparsely populated — rural or suburban. And your income can’t exceed 15% above the local median. 

Other “standard” mortgages that could work for teachers

Even if you don’t qualify for a USDA or VA loan, you may find you get the best overall deal with a standard mortgage. 

Explore ones backed by the Federal Housing Administration (an FHA loan) or Freddie Mac or Fannie Mae (a conventional loan).

>> Related: FHA loan with 3.5% down vs conventional 97 with 3% down

Those percentages (3.5 percent and 3.0 percent) refer to the size of the down payment you need for each. So these are relatively affordable.

You need to compare the total costs of these with special mortgages marketed to educators. The one with the right combination of rates, fees, closing costs, and discounts will be the right one for you.

FAQ about home loans for teachers

Are home loans for teachers worth it?

If you qualify for the right one, teacher home loans are definitely worth it. Many save thousands. Or even tens of thousands with the Good Neighbor Next Door program. And the hassle involved can be minimal. Indeed, the time you invest in maximizing your savings could turn out to be the highest hourly rate you ever earn.

Are teacher home loans always best for teachers?

Teacher home loans often have the best perks for teachers. But some may get better deals through other programs. For example, if you’re also a veteran and your service entitles you to a VA loan, you’ll find the deal you get with one of those hard to beat. But even those ‘standard’ loans can be combined with certain incentives, like down payment assistance. So make sure you explore your full range of options before settling on a home loan.

Do I have to use Teacher Next Door?

Teacher Next Door can help match teachers with local homebuying programs and discounts. Of course, you’re not required to use Teacher Next Door by any means. You’re free to research down payment assistance programs on your own and approach them directly. But why avoid Teacher Next Door? Most who use it find it exceptionally helpful as a way of discovering what’s on offer locally.

Do I need good credit to qualify for a teacher home loan?

Each lender and program sets its own minimum credit requirements. So those with a troubled financial past may need to hunt down mortgages for which they qualify. But some approve borrowers with scores around the 600 mark.

If your credit score is really poor, you may not find a willing lender at all. That’s where the Fresh Start program comes in. It can help you quickly rebuild your credit, allowing you to get the mortgage you want.

Compare lenders to save more 

The only way to be sure you have the best mortgage deal is first to get competitive quotes from multiple lenders. Then go through them, comparing each with the others.

Of course, your aim usually is to find the one with the lowest total cost of borrowing: the one that sees you pay least over the lifetime of your loan. But it’s perfectly legitimate to pick one that suits your needs better now.

>> Related: How to shop for a mortgage and compare mortgage rates

So, if your priority is to get on the homeownership ladder quickly, you might prefer to pay a bit more in the long run for lower upfront costs. Maybe you need a low down payment. Or to save on closing costs.

Perhaps you’ll find a “special” mortgage, designed for educators, is best for you. But don’t assume one of those will be. Just rely on the math.

Check your eligibility

Qualifying for a home loan isn’t as difficult as many teachers and other professionals think.

As mentioned, you may not even need a “special” program to buy a home.

Start your mortgage eligibility check here. There’s no obligation, and getting started takes just a few minutes.

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