Home Loans For Teachers: A Guide To Teacher Home Buying Programs

Being a teacher can involve many sacrifices, including financial ones. But educators may qualify for help with buying a home. From low down payment programs to lower interest rates, teachers could save thousands of dollars when they’re ready to buy.

There are many different types of mortgage loans, down payment assistance programs and grants available to teachers and educators. Some are targeted toward certain groups of buyers, designed to give back to teachers and other public service officials. Some of these programs can be combined with discounted mortgages to help make buying a home even more affordable for educators.

Let’s take a look at some of the most well-known teacher mortgage programs and the benefits and requirements for each.

It’s important to know that you may not easily find a lender who accepts the following programs.

Rocket Mortgage® might not accept or participate in certain programs depending on certain eligibility requirements so it's important to talk with your Home Loan Expert.

1.Teacher Next Door

The Teacher Next Door (TND) program offers grants and down payment assistance to public service professionals and teachers. The TND program is an all-inclusive service provided by a private agency for financing single-family homes while you receive a large selection of discounts and incentives including:

• Grants as high as $8,000 in some qualifying areas

• Up to $10,681 in down payment assistance

• Low interest rates

• Waive fees such as application and broker fees

• Discounted title fees

• Free home appraisals (up to $545)

• Enrollment in optional credit counseling

To qualify for these benefits, home buyers must work with a TND agent, borrow within their lender network and must be a pre-K – 12th-grade teacher. The program – which was initially developed solely for teachers – has also expanded into programs for a wide variety of public servants and health care professionals.

TND can be used with first-time home buyer or other programs like Fannie Mae’s HomeReady, or Freddie Mac’s Home Possible, or the Good Neighbor Next Door program that offer additional benefits.

Rocket Mortgage is not affiliated with or otherwise sponsored by Teacher Next Door.

2. Good Neighbor Next Door

The Good Neighbor Next Door (GNND) home financing program is funded through the U.S. Department of Housing and Urban Development (HUD) to help teachers and other civil servants buy a home. This program helps build up communities in designated revitalization areas. Qualified teachers buying a HUD home can receive a 50% discount off the listing price of a home.

When you buy a HUD home in the designated revitalization area where you work, HUD places a silent second mortgage on the property to ensure that you fulfill the 3-year owner-occupancy requirement. After living in the home as your primary residence for 3 years, HUD lifts the second mortgage, and you own the property, subject to the primary mortgage. If you don’t fulfill the owner-occupancy requirement, you will be required to pay full price for the property.

There are a few requirements you must meet to be eligible for the Good Neighbor Next Door program:

• You must be a certified pre-K – 12 full time teacher (or other designated public servant) teaching in a revitalization area.

• You must purchase a home in the designated revitalization area where you work.

• You must commit to live in the home for a minimum of 3 years to receive the discount.

• The property you purchase must remain your primary residence for all 3 years.

Rocket Mortgage is not affiliated with or otherwise sponsored by Good Neighbor Next Door.

3. Homes for Heroes®

You may have a bundle of money saved to put a down payment on a home – but you’ll still have to cover closing costs and other fees that pop up during the process. There are many Homes for Heroes programs, but Homes for Heroes, Inc. can help U.S. teachers reduce these fees to make buying a home more affordable. This program can help you save on closing costs, inspection fees, title fees and more and can often be combined with other incentive programs.

You’ll need to be a certified current or former pre-K to 12th-grade or postsecondary teacher to qualify for the Homes for Heroes® program.

Rocket Mortgage is not affiliated with or otherwise sponsored by Homes for Heroes, Inc.

4. Government-Backed Mortgages For Teachers

There are many government programs designed to encourage first-time homeownership or provide assistance to low to median-income home buyers looking for affordable housing.

Government home loans are mortgages that are funded through the federal government. These loans are ideal for first-time home buyers, borrowers who purchase in rural areas and current or former members of the military. These loans typically come with more flexible eligibility requirements and low money down options.

There are three main types of government home loans: FHA, USDA and VA. All three have different benefits and may be combined with many of the above grants.

FHA Loans

You’ll pay as little as 3.5% down if you have a 580 credit score or higher with an FHA loan. FHA loans are great options for low- to mid-income home buyers.

Rocket Mortgage has a 580 minimum credit score requirement for FHA loans.

USDA Loans

USDA loans can help you avoid down payments altogether if you plan to purchase a home in a designated rural area. You’ll need to verify the home you’re purchasing meets the USDA location standards and area median income guidelines – use Fannie Mae’s area median income look-up tool to see if you meet the USDA’s income guidelines.

USDA mortgages technically have no minimum requirement, but most lenders expect a credit score of 640 or higher.

Rocket Mortgage does not currently offer USDA loans.

VA Loans

VA loans have low mortgage rates, no down payment requirements and no ongoing mortgage insurance requirements. These loans are intended for veterans and qualifying active duty service members and surviving spouses.

Borrowers do pay a one-time funding fee that can be rolled into the mortgage. VA mortgages don’t have minimum credit requirements, but you’ll have the most qualification flexibility with a 620 median credit score or higher.

Rocket Mortgage has a 580 minimum credit score requirement for VA loans with sufficiently low debt-to-income ratios.

Is A Government Mortgage Right For You?

If you have limited funds for a down payment, government-backed loans might be a good option. However, choosing the best loan for buying a house depends on a wide variety of factors specific to your situation.

There is a common misconception that conventional mortgages – those offered by private lenders – require a 20% down payment. It likely stems from confusion about the importance of the 20% threshold. That’s when homeowners have enough home equity to avoid or drop private mortgage insurance (PMI). In reality, many conforming loans require a down payment of only 3%.

Can You Use A Government Program With Any Lender?

Not all lenders offer all government-backed home loans, though most offer some. Not all lenders offer all three types of government loans, either so do some research before you decide on a lender.

Rocket Mortgage, for example, offers FHA and VA loans, but currently does not offer USDA loans.

It’s also important to note that not all lenders can accept government-funded assistance programs. The Good Neighbor Next Door program, for instance, is typically provided through an FHA mortgage, which many (but not all) lenders offer. Talk to your lender about the programs you’re interested in to determine if it’s possible to use them.

5. Your Teachers Union

If you belong to a teacher’s union, they may offer teacher home loan programs and special discounts. If you’re a member of the American Federation of Teachers (AFT), you may qualify for one of their two programs. If you’re a member of the United Federation of Teachers, you may qualify for one of UFT’s discount programs. Also check with your state or local union to see what types of assistance they may offer.

6. First-Time Home Buyer Assistance Programs

You might be pleasantly surprised to learn that there are many more loan programs available to help first-time home buyers.

In addition to the nationwide programs we’ve mentioned here, there are many states, municipalities, nonprofits and private agencies like Teacher Next Door with programs designed to encourage new buyers to purchase within their areas. HUD maintains a list of these local home buying programs.

Remember, you can combine any of these home buyer assistance programs with any of the benefits of working with Teacher Next Door.

If you're a teacher looking to buy a home, it’s important to review all of the teacher home loan programs available to assist you. Whether you’re looking to refinance and lower your monthly payment or looking to qualify for a mortgage with a low credit score, there are several teacher home loans and programs available.

Interested in learning more about buying a home? Consider joining a first-time home buyer class.