Teachers are struggling to buy homes — here’s where to turn for help
US teachers can barely afford homes near where they teach.
The average teacher can afford just 12% of homes for sale within 20 minutes of driving distance from their schools in 2023, a recent Redfin analysis found. That’s down from 17% last summer and 30% in 2019. A listing is considered affordable if the monthly mortgage payment is no more than 30% of the teacher’s median salary in that area, assuming a 10% down payment.
As a result, government and private programs are offering ways to help teachers buy homes to help alleviate the teacher shortage crisis across the country.
"Whether there are down payment assistance programs or really low down payment programs specifically for teachers, we need to have specific programs to combat this issue," Chen Zhao, Redfin's economics research lead, wrote to Yahoo Finance, "similar to the way we have programs for groups like veterans."
Here are some of the programs that can help.
50% off the listing price!
The Good Neighbor Next Door, sponsored by the US Department of Housing and Urban Development, or HUD, is a federal program that provides a 50% discount on selected homes for qualified households.
The program is available to certain full-time government workers such as pre-K to 12th grade teachers, law enforcement officers, and firefighters. To qualify, public employees can only buy homes in the area where they serve and must live in them as their primary residence for at least 36 months.
"The discount is based on the appraised value," Michael Curry, HUD's single family housing program advisor, told Yahoo Finance. "So we appraise every property before we list it and the discount is based on that appraised value."
Eligible families and individuals can search for homes in revitalized areas on the HUD's listing website. Whoever wins the listing will have the opportunity to buy that home at half the listing price. No interested party can increase the bid on a house over the listing price, and if there are multiple applicants for one home, the program will select one buyer at random.
"When these properties do become available in the lottery period, we usually have multiple bids," Curry added.
The housing shortage in recent years has affected the number of available HUD listings, though, so Curry suggested that applicants check the HUD website often.
"We receive a number of questions on why there are not many properties eligible and things of that nature," Curry said. "So a teacher would need to be reviewing HUD [listing website] weekly or even daily to see if a property is listed in their area."
Not in a revitalized area? Check these out
Educators looking to purchase homes in non-revitalized areas can turn to various mortgage and down payment assistance programs as well.
Aside from the government-insured FHA (Federal Housing Administration) home loan that allows a down payments as low as 3.5% of the sales price, Fannie Mae offers a HomeReady program with conventional loans with 3% down payments for homebuyers whose income is at or below 80% of the area median income.
And also, "both HomeReady and FHA now allow the use of positive rent payment history to be used to qualify more borrowers," a Fannie Mae spokesperson said.
Fannie Mae also introduced a Sweat Equity program that enables borrowers to use their volunteer labor to increase their equity in a home. The borrower would do so by working with participating nonprofit housing providers.
"It is important to note that the value of sweat equity can include labor from volunteers who are not the homebuyer," Fannie Mae spokesperson said, "and the homebuyer may accrue sweat equity by supporting the nonprofit on projects unrelated to their new home."
States have homebuying initiatives for teachers as well.
For instance, California introduced the School Teacher and Employee program in 2018, now part of the MyHome program that lends qualified homebuyers a down payment equivalent to 3% to 3.5% of the sales price at a simple interest rate of 1%.
"You don't have to make monthly payments on that assistance, essentially you don't have to pay it back until you decide to sell the home or if you refinance in the future," Jason Mata, a mortgage professional with American Pacific Mortgage, who also offers discounts on processing fees for teachers said. "Make it more affordable for teachers."
Private organizations with perks
There are also private organizations providing perks to teachers.
For instance, Homes for Heroes, a for-profit cause-related company, offers homebuyers rebates after closing. The website states that members receive around $700 in rebates for every $100,000 spent on homebuying, which equates to about a 0.7% rebate check when the buyer closes on escrow with the organization.
However, buyers should be aware of the requirements associated with these perks. At Homes for Heros, buyers participate by working with the organization's real estate agents, lenders, and title and inspection specialists. The website stated that by working with each additional specialist, homebuyers can increase their qualified rebate amount.
Most private organizations have similar requirements, so it's crucial for buyers to carefully research each one to understand what it takes to be eligible.
"These kinds of things need to be researched and likely need to be set into motion in advance of the decision to purchase a home," Keith Gumbinger, vice president at HSH.com, said. "So a potential eligible homebuyer will likely need to conduct the research beforehand."
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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