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.
Hand-Underwriting: 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
www.teachernextdoor.us/FAQs Teacher Next Door ReviewsAPPLY NOWFresh Start Program
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.
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:
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:
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:
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:
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 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:
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.