our everyday life

HUD Housing for Teachers

by Don Rafner, studioD

If you are a teacher, you can buy foreclosed homes owned by the U.S. Department of Housing and Urban Development at lower prices through the Good Neighbor Next Door Program. HUD offers the program as a way to help teachers -- along with emergency medical technicians, law-enforcement officers and firefighters -- become homeowners.

The Program

Through its Good Neighbor Next Door program, HUD sells properties in its portfolio to teachers for half price. When financing a HUD-home, a teacher must sign a first and a second mortgage. The second mortgage comprises the 50 percent discount. As an example, a teacher who buys a HUD home listed at $100,000 would only pay $50,000 for that property. The second mortgage, then, would be in the amount of $50,000, the discount he receives. Teachers, though, actually never make payments on these second loans as long as they fulfill HUD's residency requirement.

Residency Requirement

Teachers participating in the program must agree to live in the HUD homes they purchase for at least three years. Every year during this period, HUD sends program participants a certification letter. Participants must confirm that they still reside in their homes by signing and returning the letter to HUD. There's a reason for this rule: HUD doesn't want teachers to buy discounted homes from their inventory simply for fast resale.

Making an Offer

Teachers who plan to participate in the Good Neighbor Next Door program must work with a licensed real estate agent, since HUD doesn't accept offers from individual consumers. To submit an offer, first, a teacher identifies homes available in his area through the program's website. Then, his agent submits a written offer to the HUD-appointed agent named in the listing. HUD doesn't negotiate Good Neighbor Next door prices, so offers must be at full price.

Financing the Sale

To buy a home through the Good Neighbor Next Door program, teachers may apply for conventional loans, FHA-insured or U.S. Department of Veterans Affairs-insured loans. Down payment requirements vary by loan type. For instance, some borrowers may only need a down payment of 3.5 percent if approved for an FHA-insured loan, while conventional loan borrowers may need to bring a 20 percent down payment to the closing table. The credit scores necessary for approval also vary by lender and loan type. Teachers taking out FHA-insured loans must have credit scores of at least 580 to qualify for the low 3.5 percent down payment option. On the other hand, program participants may need credit scores as high as 740 to qualify for conventional loans. If teachers need to make significant improvements to a HUD home, they can apply for the FHA 203(k) mortgage program. With this type of FHA-insured loan, teachers, who need to make $5,000 or more worth of repairs to a home, can roll the purchase price and the cost of repairs into one loan.

About the Author

Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.