Teacher Next Door Blog

How can a teacher with bad credit get approved for a mortgage to buy a home?  As the largest National Home Buying Program in the U.S., it is a question we are asked every day.   The honest answer is, it depends.

FICO scores between 500-580

FHA now allows loan approvals with FICO credit scores as low as 500.  However, if your score is between 500 and 580, there are at least two important differences from the typical FHA loan:

Down Payment: 
FHA requires all buyers with scores below 580 to put a minimum of 10% down.  Whereas other loan programs may be as low as 0-3.5% down.

In addition to the larger down payment, with a score below 580, FHA will require that the application go through a process known as “hand-underwriting,” as opposed to the typical automated process.  The underwriters will be looking for a specific hardship to explain the low credit score and will likely need a good “letter of explanation”

Compensating factors: During hand-underwriting, the underwriter will consider compensating factors, to get the loan approved for you.  These may include things such as a long and stable employment history, high income, excellent rental history and high cash reserves.  A low debt-to-income-ratio will also help.  For example, 29/41. (29% or gross for PITI and 41% of gross total monthly debt.) 

Teacher Next Door accepts all applications, regardless of credit score and our Preferred Lenders will work hard to get a loan approval for you.  Many buyers with scores below 580 may find it necessary, or easier, to repair their credit prior to moving forward with a home purchase.  Teacher Next Door’s Fresh Start Program could be a possible solution to help you raise your score.

FICO score of 580+

If your score is above 580, you should be able to get an FHA loan with only 3.5% down payment.  You may also not need to go through the hand underwriting process, making it easier to get approved.    

Grants and Down Payment Assistance for Teachers

All teachers and school employees are eligible for the Teacher Next Door GRANT, regardless of credit score.  However, you would still need to qualify for the mortgage financing.  With a credit score above 580, you may be eligible for down payment assistance.  Teacher Next Door requires each of our three national Preferred Lenders to offer several different down payment assistance options.  These DPA programs may include Home in Five Advantage, Georgia Dream, Florida First, Chenoa, Unison and several others.  When you apply through the Teacher Next Door Program, a TND Program Specialist will contact you to go over the various options.  A credit check is not required to complete the pre-application

If you have other Questions about the Teacher Next Door Program, please visit the Frequently Asked Questions section at


Teacher Next Door Reviews


Fresh Start Program

Posted by Teacher Staff on April 8th, 2019 4:12 PM

Congratulations Kaleb and Becca George of Yuba City, CA on your beautiful new home! Thank you TND Realtor, Robert Walsh and TND Loan Officer, Rahmun Aung Khin and team for doing a great job and for giving back to your communities! For info on TND Grants, visit www.TeacherNextDoor.us.

Teacher Next Door currently has grants available up to $6,000.00 and down payment payment assistance up to $10,681.00.  This program is not just for first time buyers.  However, if you are a first time buyer, you may also qualify for the Teacher Next Door First Time Buyers Program.  

The Teacher Next Door Program is available in all 50 states.  To be eligible, you must be a teacher, nurse / healthcare professional, law enforcement, firefighter, EMT or government employee.  All support staff in these public service professions are also eligible.


Read Teacher Next Door REVIEWS?


Fresh Start Program

Posted by Teacher Staff on February 5th, 2019 9:48 AM

Teachers, non-instructional staff and school employees are eligible for the Teacher Next Door Program.  Through this specialized, nationwide program, you may be eligible for grants and down payment assistance.  Depending on the state, grants may include government grants and / or the Teacher Next Door closing cost grant.  Preferred lenders of Teacher Next Door, work with these grant programs and have down payment assistance programs in all 50 states. 

When you complete an online pre-application, your personal financial information is not collected, and no credit check is required.  A Teacher Next Door Program Specialists will contact you to discuss the program and go over the options available, including any grants and down payment assistance you may be eligible for.  In addition, they will discuss the different home loan options and how they may be used with your Teacher Next Door benefits.  These different loan types may include:


The FHA Home Loan offers government-backed assistance for first-time home buyers.

An FHA home loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans were originally designed for low to moderate income borrowers who were unable to make a large down payment. Recently HUD pushed loan amounts higher to help with the growing demand for loans above the conventional conforming limits. FHA loans allow the borrower to borrow up to 96.5% of the value of the home. The 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans popular with first-time buyers.

FHA Home Loan Features & Benefits:


  • Upfront and monthly Mortgage Insurance requirement
  • 3.5% Down Payment
  • Lower Credit Scores accepted
  • Minimum Reserves
  • 100% of the Down Payment can come from a Gift
  • No income qualifications available (for Streamline Refinances only)



Conventional mortgage loans are advantageous to borrowers with outstanding credit scores and little debt.

A conventional mortgage loan is a type of mortgage in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac. About 35-50% of mortgages, depending on market conditions and consumer trends, are conventional mortgages. In other words, Fannie Mae and Freddie Mac guarantee or purchase 35-50% of all mortgages. Conventional mortgages may be fixed-rate or adjustable-rate mortgages. Conventional mortgage loans are typically only an advantage to borrowers with outstanding credit scores and low debt to income ratios.    

Conventional Mortgage Loan Features & Benefits:

  • Maximum Loan Amount is $453,100
  • 3%-5% Minimum Down Payment
  • Monthly Mortgage Insurance is required on LTVs over 80%
  • Mortgage Insurance options include monthly, upfront mortgage insurance or lender paid



With a USDA Home Loan, you can build, repair, renovate, or relocate a home for little money down.

USDA home loans are primarily used to help individuals purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, providing water and sewage facilities. Applicants for loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. Please feel free to call or email to find out if you or a particular property qualify!

USDA Home Loan Features & Benefits:

  • Very specific income and property qualifications
  • Upfront and Monthly Guarantee Fee will apply
  • 100% LTV


FHA 203K

FHA 203K Purchase and Renovate Loans

Purchase and renovate a home all with the same loan.

Simply put, buy a home and remodel it with the same loan. Purchase and renovation loans require three professionals to make sure you navigate this product and close properly: a solid HUD consultant, a great contractor and a loan officer with a company that knows how to close this product.


Purchase and Renovate Loan Features & Benefits:

  • Maximum loan amount is subject to county loan limits
  • 3.5% down payment
  • Lower credit scores accepted
  • Minimum Reserves
  • Upfront and monthly Mortgage Insurance premiums
  • 100% of the down payment can come from a gift


HUD home loans

HUD home loans are a great option for bargain shoppers.

HUD home loans are for homes that have been foreclosed and HUD as retained ownership of the property. This is great if you are a borrower looking to get into a home with nothing down and at the lowest price possible. This is not for people that are not ready to make significant improvements to the property. Since they were foreclosed, many times the homes have been damaged and require renovation.

HUD Home Loan Features & Benefits:

  • $100 Down Payment
  • FHA Home loan product
  • Specific to the property


Borrow or refinance up to 100% with our VA Home Loans for Veterans

A VA home loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.

The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans to help purchase properties with no down payment. Most single-family homes are eligible, and our lenders are able to help approve condos that are not currently approved by the VA. In either case, you will want to work with a Loan Professional to review each individual property.

The VA loan for veterans allows for up to 103.3 percent financing without private mortgage insurance. Our lenders  also offer loans for veterans with up to $6,000 for energy efficient improvements. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA; this fee may also be financed. In a purchase, veterans may borrow up to 103.15% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment.

VA Loan Features & Benefits

Loan Terms: Fixed 30-year, 5/1 ARM, 3/1 ARM

You are eligible if you served the under any of the following timelines and were honorably discharged:

  • 2 years active Duty
  • 6 years Reserves Duty
  • 90 days War Time
  • 181 days Non-War time
  • Please don’t hesitate to call or email to review questions. We can get your Certificate of Eligibility within minutes and can review your eligibility with you



Regardless of which loan type you end up using, Teacher Next Door is able to help teachers, non-instructional staff and school employees through the home buying process, from start to finish.  For more information on Teacher Next Door, please visit www.teachernextdoor.us.


Posted by Teacher Staff on October 6th, 2018 1:07 PM


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