If you’re a teacher looking to purchase a home in Arizona, your homeownership journey needs to start by finding a home financing option that works well for you. Fortunately, there are various home loan options for teachers in Arizona that you can choose from. We’ve highlighted the essential details you should know about each option, so you can start narrowing down your options and better understand your home loan choices.
Read on to learn about the Arizona teacher home loans and programs that you may want to consider.
1. Frontline Heroes Mortgage
The Frontline Heroes Mortgage is designed to help frontline heroes, including teachers, local law enforcement and firefighters, purchase a new home in Arizona. This mortgage option provided by Arizona Central Credit Union offers 100% financing for a home that’ll be the buyer’s primary residence. The buyer must invest at least 1% of the home’s purchase price, or $1,000, whichever is less, toward closing costs.
Perhaps most importantly, the Frontline Heroes Mortgage requires no down payment. Because Arizona Central Credit Union finances 100% of the purchase price, buyers can avoid paying mortgage insurance, saving you thousands of dollars throughout the loan term. As a result, the Frontline Heroes Mortgage is a practical option for teachers who may not have a 20% down payment saved. This unique program can help to get you into a home sooner.
2. Conventional Mortgage
A conventional mortgage is a traditional type of loan that isn’t backed by a government entity. This mortgage option generally has a fixed interest rate, meaning you’ll pay the same interest throughout the life of the loan. Additionally, the down payment on a conventional mortgage can be as low as 3%.
Conventional loans have strict qualification requirements. Most lenders require borrowers to have a credit score of at least 620. Borrowers often need a debt-to-income ratio (DTI) of around 36%. DTI represents your total monthly debt-related payment, like credit card and student loan payments, compared to your gross monthly income.
If you’re considering a conventional mortgage, your loan-to-value ratio (LTV) will also affect your interest rate. Your home’s LTV is your borrowing amount divided by the appraised property value. If you buy a home appraised at $200,000 and put $20,000 down, you will need to borrow $180,000. That means your LTV is 90%.
Having a lower LTV increases the chances of your loan being approved. Lenders often charge higher rates for higher LTVs, because the higher LTV increases the likelihood that a borrower may default on the loan. If your LTV is 80% or lower, you may not need private mortgage insurance (PIM), which can save you money per month.
Your down payment can impact your LTV. A larger down payment will lower your LTV and help you avoid paying PMI.
3. FHA Loans
FHA loans are often a good choice for first-time homebuyers and borrowers with lower credit scores or smaller down payments. These loans have different requirements than traditional mortgage options, so borrowers who don’t qualify for a conventional loan may still be eligible for an FHA loan.
FHA loans require you to have a minimum credit score of just 500 and a DTI of 50% or less. You can put as little as 3.5% down on your home but will need to pay FHA mortgage insurance. The duration of those mortgage insurance payments depends on the size of your down payment. FHA loans also allow you to use cash gifts to help cover your down payment, so a friend or family member could donate money to help you make a larger down payment.
4. USDA Home Loans
USDA home loans are government-backed by the United States Department of Agriculture. The USDA Rural Development Guaranteed Housing Loan Program is a zero-down mortgage with low-interest rates. These loans help borrowers who live in rural and suburban areas meet specific income requirements to make their dream of owning a home a reality.
To qualify for a USDA loan, you must have a total DTI ratio of less than 41%. Your monthly payment, which includes the principal, interest, insurance, and taxes, must be 29% or less of your monthly income. While the USDA doesn’t have specific credit score requirements, most lenders may require a minimum score of 640.
A USDA home loan might be ideal if you are a teacher living in rural or suburban areas of Arizona. Check out the USDA eligibility map to see if your new home may qualify.
5. VA Loans
The U.S. Department of Veterans Affairs guarantees VA loans. These loans are designed for military veterans, active duty military and their eligible surviving spouses. A VA home loan is ideal for a teacher who is a veteran or has a spouse who is a military member.
With a VA loan, you aren’t required to make a down payment on a new home. While the VA doesn’t set a credit score requirement, most lenders will require a credit score of at least 620. Lenders may also have varying DTI requirements. Once approved, you will also need to pay a VA funding fee that ranges from 1.4% to 3.6% of your total loan amount.
Home Buying Programs For Arizona Teachers
In addition to the above Arizona teacher home loans, several programs can make it easier to own a home. These AZ teacher homebuying programs provide extra money to help you cover home purchase costs, and they can help to fill in financial gaps and get you into a home sooner. Let’s delve into some of the home loan programs for Arizona teachers to see if you qualify.
Home in Five Program
Designed for Maricopa County residents, the Home in Five Program provides qualified buyers with money to help with the cost of their required down payment. If you’re a teacher with a household income under $112,784, you may qualify for this program, which can help with a grant of 4% of your home’s purchase price. Teachers may also be eligible for an additional 1% down payment assistance.
WISH First-Time Homebuyer Program
The WISH First-Time Homebuyer Program helps low-and-moderate-income households to buy a home with matching grants of up to $22,000. You can use those grants for expenses, including down payment or closing costs. The program is designed for households transitioning from renting to owning and is offered throughout Arizona. It can help teachers and their families with extra money to make buying a home more accessible.
Arizona Central Credit Union Can Help You Finance The Purchase Of Your Next Home
As a teacher in Arizona, you have many loan and homebuying options that can support your journey to homeownership. Arizona Central Credit Union can help you find the right loan option for your needs, financial situation and goals. To start, visit our prequalification page to determine which loan options you may qualify for. Contact one of our mortgage specialists today if you need additional information or have any questions.
