As we begin a new school year, we want to recognize all that our educators do for our community. Teachers are the cornerstone of our communities. They shape future generations and deserve a chance to become permanent members of their communities through homeownership. Almost everyone can think of one or two teachers who have impacted their lives, no matter how old they get, so thank you!

Whether you’re a first-time homebuyer or looking for an investment property, there are loan programs and resources to help teachers and educators succeed in purchasing a home.

  • Conventional Loans: Flexible loan options with low down payments and competitive rates for teachers.
  • FHA Loans: Ideal for teachers with lower credit scores, offering low down payments and more lenient requirements.
  • NFM Flex: A special FHA loan with an added down payment assistance benefit. Great for first-time homebuyers!
  • VA Loans: No down payment or PMI required for veteran teachers, with lower interest rates and flexible use.
  • USDA Loans: Perfect for teachers in rural areas, offering no down payment and fixed interest rates.
  • Special Programs: Options like Teacher Next Door and down payment assistance make homeownership more affordable for educators.

 

Conventional Loans for Teachers

One of the most common types of mortgages available is the conventional home loan.

What Are Conventional Loans?

Conventional loans are privately backed and are not insured by the government, unlike FHA, USDA, or VA loans. They are the most common mortgage type in the U.S. and often have favorable terms for teachers, such as competitive interest rates and a low 3% down payment option.

How Do Conventional Loans Differ from Government-Backed Loans?

Conventional loans do not have the same strict criteria as government-backed loans but they generally require higher credit scores; typically 620 or above. While government-backed loans like FHA and VA often come with more limitations on the property, conventional loans offer a bit more freedom. For example, teachers can use a conventional loan to purchase a second home, rental property, or investment property.

Another key difference is that conventional loans don’t require upfront funding fees, a significant cost-saving compared to loans like FHA and VA loans. However, if you do not make a 20% down payment, you may be required to pay for Private Mortgage Insurance (PMI) until you reach 20% equity in the home.

Advantages of Conventional Loans for Teachers

  • Flexibility: Conventional loans can be used to purchase a primary residence, second home, or rental property.
  • More Options: Conventional loans are available as fixed-rate, adjustable-rate, conforming, Jumbo loans and non-qualifying mortgages.
  • Higher Loan Limits: Compared to government-backed loans, conventional loans often have higher loan limits, allowing teachers to purchase homes in more expensive areas.
  • Low Down Payment Options: Some conventional loans require as little as 3% down, making homeownership accessible to those without large savings.

Considerations of Conventional Loans

  • Higher Credit Score Requirements: Conventional loans typically require a credit score of 620 or higher, while government-backed loans often allow for lower scores.
  • PMI: Unless you make a 20% down payment, you’ll be required to pay for private mortgage insurance, adding to your monthly payments.

 

FHA Loans for Teachers

FHA loans are a great option for teachers who may not have perfect credit or a large down payment. They are designed to make homeownership more accessible to first-time homebuyers, but they are also available to anyone who meets the eligibility criteria.

What is an FHA Loan?

An FHA loan is government-backed and insured by the Federal Housing Administration (FHA). While the FHA does not lend money directly, it guarantees the loan, which encourages private lenders to offer more favorable terms to buyers. FHA loans allow for smaller down payments, sometimes as low as 3.5%, and more lenient credit requirements.

Advantages of FHA Loans for Teachers

  • Low Down Payment Option: FHA loans typically require a down payment of only 3.5%, which is low, like the other down payment options on his list.
  • Flexible Credit Requirements: FHA loans are designed for borrowers with lower credit scores, allowing teachers to qualify even if their credit score is as low as 580 (500 for special circumstances).
  • Assumable Loans: FHA loans can be transferred to a new buyer, which can be a huge advantage if interest rates have risen since the original loan was taken out. This allows you to sell your home and offer a lower interest rate to the buyer.

Considerations of FHA Loans

  • Upfront and Ongoing Mortgage Insurance: FHA loans come with an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount, and an annual mortgage insurance premium (MIP) that is paid over the life of the loan.
  • Property Restrictions: FHA loans require the home to meet certain safety and livability standards, which may limit the properties you can buy.

 

NFM Flex Loan for Teachers

Our NFM Flex loan is an FHA loan but with some of the added benefits of a down payment assistance program!

Benefits of NFM Flex for Teachers

  • Zero Down Payment: Plus, additional financing towards down payment and closing costs
  • Down Payment and Closing Cost Assistance in the form of a 2nd lien
    • 5% financing on first lien
    • 5% financing on 2nd lien covers the down payment with an extra 1.5% to go towards closing costs
  • No Income Cap: Like FHA loans, there is no maximum income limit to qualify
  • Credit Score: FHA minimum FICO score 660 required
  • Flexibility on Property Type: Can be used on single-family homes, condos, townhomes, manufactured homes & duplexes

 

VA Loans for Teachers

For teachers who have served in the military or are currently serving, the VA loan program offers one of the best mortgage options available.

What Is a VA Loan?

VA loans are government-backed by the Department of Veterans Affairs (VA) and offer significant benefits to veterans, active-duty service members, and surviving spouses. The VA guarantees a portion of the loan, allowing lenders to offer better terms with no down payment or private mortgage insurance requirements. There are a few myths surrounding VA loans, but the many advantages of this loan eclipse them all:

Benefits of VA Loans for Teachers

  • No Down Payment: VA loans do not require a down payment, which can save thousands of dollars upfront.
  • No PMI: Unlike conventional and FHA loans, VA loans do not require private mortgage insurance, reducing monthly payments.
  • Lower Interest Rates: VA loans typically offer lower interest rates than conventional loans, which can save teachers thousands of dollars over the life of the loan.
  • Lifetime Benefit: You can use your VA loan benefit multiple times throughout your life, making it a flexible and long-term advantage.

If you want to know the eligibility requirements for the VA loan guarantee, based on your service history, the agency has a very useful chart that explains it.

 

USDA Loans for Teachers

If you’re a teacher working in a rural area, a USDA loan might be a perfect fit. USDA loans are designed to help people in rural communities become homeowners and offer excellent terms for low- to moderate-income buyers.

What Is a USDA Loan?

USDA loans are government-backed by the U.S. Department of Agriculture (USDA) and are intended for people purchasing homes in rural areas. These loans offer zero down payment options, low interest rates, and long repayment terms, making them a great option for teachers living or working in rural communities.

Advantages of USDA Loans for Teachers

  • No Down Payment: USDA loans do not require a down payment, making them a great option for teachers who have not been able to save a large sum of money.
  • Fixed Interest Rates: USDA loans have fixed interest rates, so you’ll always know what your monthly payments will be.
  • Flexible Credit Requirements: There is no minimum credit score required for USDA loans, though most lenders prefer scores of 640 or higher.
  • Assumable Loans: Like FHA and VA loans, USDA loans are assumable, allowing a new buyer to take over your mortgage if interest rates rise.

Reach out to learn more about income eligibility limits for USDA properties!

 

Special Programs for Teachers

In addition to conventional, FHA, VA, and USDA loans, there are also numerous special programs designed specifically for teachers to help with down payments, closing costs, and credit challenges.

Down Payment Assistance Programs

Many local counties and states offer special down payment and closing cost assistance programs for teachers and citizens in general. These programs vary by location but often provide grants, forgivable loans, or low-interest second mortgages to help cover the down payment and closing costs.

We have several down payment assistance programs available in-house; reach out to learn more!

Teacher Next Door

The Teacher Next Door program is one of the most well-known homebuying programs for teachers. It offers grants, down payment assistance, and other benefits to make homeownership more affordable.

  • Grants: Teachers can receive up to $8,000 in homebuying grants through this program.
  • Down Payment Assistance: The program offers up to $10,000 in down payment assistance.
  • Additional Perks: Teachers also get access to preferred interest rates, appraisal credits, and more.

Teachers aren’t the only ones who benefit from this program; nurses, law enforcement officers, firefighters, EMTs, and government employees can also secure discounts, grants, and support with Teacher Next Door. 

Fresh Start Credit Repair Program

For teachers with credit challenges, the Fresh Start Credit Repair Program through Teacher Next Door provides free consultations and one-on-one assistance to improve credit scores, helping educators qualify for better mortgage terms.

Good Neighbor Next Door

HUD’s Good Neighbor Next Door program offers significant discounts on homes in designated revitalization areas. Teachers who commit to living in these areas for three years can receive a discount of up to 50% on the home’s purchase price!

Tips for Teachers Saving for a Down Payment

Even with assistance programs, saving for a down payment can be a challenge. Here are some tips to help you get started:

  1. Set a Budget: Review your monthly expenses and identify areas where you can cut back to save more for your down payment.
  2. Automate Your Savings: Set up automatic transfers to a dedicated savings account so that a portion of your income is saved without you having to think about it. High Yield Savings Accounts are great for this.
  3. Take Advantage of Side Income: Consider tutoring, teaching summer school, or other part-time opportunities during school breaks to increase your income and save for a down payment.

 

Final Thoughts

There are a variety of mortgage options and special programs available to teachers. Whether you’re a first-time homebuyer or an experienced homeowner. From conventional loans to government-backed programs like FHA, VA, and USDA, there is a loan option to fit almost every financial situation. Additionally, specialized programs like Teacher Next Door and Good Neighbor Next Door provide grants and discounts to make homeownership even more affordable for educators.

Take advantage of the resources available to you. Do your research, and don’t hesitate to reach out to a mortgage specialist who understands the needs of teachers. Homeownership is an achievable goal, and with the right loan program and guidance, you can find the perfect home to call your own.

Reach out with any questions, or to get started on your homebuying journey!

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Please consult with the Loan Originator to discuss your options and to receive specific DPA information. You will need to apply for a first mortgage loan with NFM, Inc. in conjunction with any down payment assistance program. All information contained herein is subject to change at any time. A training class might be required. All DPA programs require to apply for a 1st and 2nd mortgage. Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs.

Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice.