Trying to buy a house on a teacher’s salary may seem overwhelming, impossible even; home values in most areas are increasing and teacher’s pay is remaining the same. Not to mention, there are so many expenses related to buying a home, a home inspection, appraisal, moving truck and so forth. With all of these huge expenses and so little income, we have to wonder, can teachers get help buying a house?
The good news is, yes, there are quite a few options available nationwide to help teachers buy a house. There are programs that provide down payment assistance, grants, or low interest loans to cover fees like closing costs available to teachers when buying a house. These programs may also offer perks like a free home appraisal, free buyer’s representation and allow lower than normal credit scores. There are also specialized loan programs which are less expensive than traditional loans like the FHA or Conventional.
There are many different loan programs that can help teachers buy a house. To help them navigate the process, the Teacher Next Door organization was created. This organization attempts to increase home ownership amongst teachers and to support community development as one of the requirements to work with this organization is that the teachers must live in the same area they teach. Through the “Teacher Next Door” teachers will be connected to mortgage and real estate professionals working in their area who will make the home buying process easy and as stress free as possible. These professionals will help the teacher gain access to federal grant money, down payment assistance or forgivable loans set aside especially for teachers. Some of the programs included are:
Good Neighbor Next Door
This is a really unique program which offers bank owned homes for 50% off of market value which is a huge savings. Teachers are able to look online at the Good Neighbor Next Door website to see what houses are available and then express their interest in a specific home. If multiple qualified applicants are interested, they actually do a lottery style drawing to decide who gets the house. One of the requirements for this program is that the teacher to live in the house for 36 months after they buy it. It sounds like a great way to get into a house, but probably best not to be too picky since inventory is limited.
State Downpayment Assistance Programs
The name of the down payment assistance programs varies from state to state. In Arizona it is “Home in Five”, Georgia has the “Georgia Dream” and California offers the “Golden State Platinum”. Each program can provide up to $10,681.00 to use toward a down payment and closing costs when buying a house. This money is a grant and will not need to be repaid.
Homes for Heroes
This is open not only to teachers, but also to military, first responders, nurses, and doctors. The average savings when using this program is $2,400, which may not be quite as much as the other programs but every penny counts!
Fresh Start / Teacher Next Door
This is a free service offered through the “Teacher Next Door” that takes a detailed look into the teacher’s credit history and helps them increase their score quickly so that they can get the best possible rates when buying a house.
While not every program is exclusively for teachers, they are eligible for each. Each program offers its own incentives and requirements. As you can see, there is the potential to save a lot of money.
Where Does The Money Come From?
The money available while taking part in any of the “Teacher Next Door” programs or any of the down payment assistance programs come from the U.S. Department of Housing and Urban Development (HUD). This means the money comes from the federal government, but why not make some of your tax dollars work for you? Since the funding is based on government approval, there is a limited amount available and that amount changes year to year when the government creates their budget.
Local charities may also contribute to the down payment assistance programs, so it is a great idea to have your real estate agent or mortgage lender take a look to see if that is the case in your area. Some of the state specific down payment assistance programs do run out of money from time to time, so if you want to take advantage, do not hesitate.
Who is Eligible?
The requirements vary by program. However, they all require that the teacher be a full-time K-12 classroom teacher in an accredited school. Other school employees may also be eligible for the programs, again it varies. In order to qualify for the “Good neighbor next door” program, along with being a teacher, the teacher needs to be a first-time home buyer which just means they have not owned their own home in the last three years which includes owning investment properties. Each program also has credit score requirements which can vary based on the type of loan you will be using to buy a home and how much money you are able to contribute to the down payment. It is best to get your score as high as possible to assure you will be approved for a loan and to also get the best possible rate. Again, the fresh start service can help with that if your score is less than perfect.
Do I Have to Pay the Money Back?
If you were lucky enough to receive college grant money, you know that federal grants do not need to be repaid. Amazing right? So, in most cases, taking advantage of these programs offered to teachers is a huge savings that does not require repayment. If you receive a forgivable loan to use as your down payment, you are required to live in your home for a designated period of time before being able to sell or else you will have to repay the money. The time period is generally thirty-six months which will fly by. Plus, during that time, as long as the real estate market continues in the way it has for the past few years, you will have tons of equity in your house which will help you move on to a better house if you choose to.
Can A Friend or Family Member Help Instead?
The home buyer typically needs to put down 3.5% of the purchase price when using an FHA loan and a family member may contribute all of it! So, if none of the federally backed programs work for you for whatever reason, you can always ask an immediate family member or friend, depending on the type of loan you are getting, to help you out. That means teachers, reach out to your kids, your spouse or anyone else that is related by blood, marriage, or adoption to see if they would be generous enough to help you buy a home. There are some pretty strict requirements with how the money is gifted though, so take note.
The Department of Housing and Urban Development states that the money must be a gift, not a loan or a regularly occurring payment. The mortgage company will require a written letter stating who is contributing the funds, how much they are giving and that they do not expect to ever be repaid. Both the home buyer and the giver will have to sign this letter and show proof of when the funds were transferred between parties. This is not the time to do anything sneaky because the mortgage lender will look over your bank statements to make sure this was, in fact, a once only gift. If you are caught not telling the truth you will not get the mortgage loan.
Another stipulation is HUD does not allow any party who may have a vested interest in the house or transaction to contribute to the down payment. That means that someone like your real estate agent or a home builder cannot offer money to help you make a down payment. The person selling the house you are buying is also not allowed to contribute to the down payment, but there are other ways your real estate agent can negotiate with the seller to bring your costs down.
Conclusion – Do Teachers Get Help Buying Homes
So, there you have it teachers. There is help out there if you want to buy a house but do not have the money in your savings account to do so. Buying a house is always a good idea and something that should be done sooner than later. The links below will take directly to the websites where you can make sure you are eligible for a mortgage loan and to get this process started. Best of luck in your home search!
- Teacher Home Loans – 5 Mortgage Programs for Educators
- California Teacher Mortgage Programs
- Do Teachers Get Student Loan Forgiveness?