December 21, 2000

Teachers get home buying help

Bank of America has wrapped a $2,000 credit into another mortgage package, making the possibilities of home ownership a bit brighter -- especially if you're a teacher shopping for homes during the holidays. The $2,000 credit can be used to cover a borrower's closing costs on a variety of loans, aimed mostly at lower-income buyers who are strapped for the cash needed to close.

Two of the more popular programs in place are the Neighborhood Advantage Zero Down and the Credit Flex Plus. However, the special assistance is available to all teachers, regardless of income, and to also to all individuals in specific neighborhoods targeted for special funding. Teachers can now be eligible for 100 percent financing with the possibility of the $2,000 credit also part of the mix.

While details of the programs appear numerous and complex, the intent is simple: provide individuals who may not fit the traditional borrower mold with more tools to obtain a home loan. These benefits can come in the form of lower down payments, relaxed credit guidelines and even cash at closing.

The push to secure a greater share of the lower-income bracket began nearly two years ago when Bank of America hired Stephanie Smith, former HUD Assistant Secretary for Housing, as vice-president of community lending.

Smith oversees the bank's 10-year, $37 billion community lending commitment to finance home mortgages for low income and minority borrowers. Here is a capsule of the new wrinkle:

        Teacher Zero Down: A program designed to help teachers and school administrators with an excellent credit history buy homes in the communities they serve. It is an attempt to overcome the high cost of homeownership by reducing the cash needed to purchase a home. This program is only available on purchase transactions. Many loan options, including 30-year fixed rates and 5/1, 7/1 and 10/1 adjustable rate mortgages (ARMs) are available.

To be eligible for this program, one of the applicants must be a full- or part-time teacher or school administrator in a public or private primary or secondary school (i.e., K through 12). A school administrator is defined as a principal, vice principal, librarian, health-care professional such as a nurse, counselor or speech therapist. Substitute teachers, teacher aids, cafeteria workers and custodians are not eligible. In order to be considered "part-time," the applicant must have regularly scheduled hours at the school and the school must be the applicant's primary source of income.

Closing costs, including prepaid items, may come from a gift from an immediate family member, a grant from a nonprofit or local government agency, or an unsecured installment loan. The seller may contribute to closing costs.

The $2,000 closing-cost credit is provided by the bank and is a community-lending incentive. This money does not have to be repaid yet specific packages may have term periods that have to be met. In some programs, borrowers must earn less than 80 percent of the median income for the geographic area.

"The beauty of the Teacher Flex is that it applies anywhere, regardless of income," said Dan Sargent, Bank of America senior loan officer. "You don't have to live in a certain geographic area to take advantage of this product.

"With homes appreciating in many areas, this is a great option of teachers who would like to stay as close to their school as possible."

The pivotal piece in the teacher program is excellent credit. Applicants with major derogatory items (i.e., bankruptcy, repossession, foreclosure, major tax liens) will have a difficult time being approved. Borrowers must be current, with no 30-day delinquencies in the last 12 months on mortgage loans.

"While we'd like to see excellent histories on loans or rents," Sargent continued, "there is really no minimum credit scores. Teachers who are interested in the program and seriously looking for a home should take a hard look at this before they buy. It's a great way to go."

A FICO credit score is a mysterious number that frequently determines whether -- and at what interest rate -- a borrower can qualify for a home mortgage. It was designed by San Rafael, Calif.-based Fair, Isaac and Co. Inc. (FICO). A high FICO score means lower risk to the lender and can open the door to a quicker loan decision and possibly a lower rate. A low score can trigger outright rejection of an application by some lenders or a move toward a higher interest rate.

  If you're a teacher -- or a lower-income borrower -- give it a shot. Rates are at their lowest levels in 18 months and you never know what the new year will bring.

Previous columns:

• A-Rod could have made a lot on housing, 12-14-2000
• Westphal home yours for $2.8M, 12-07-2000
• New NAR chief sold on the Net, 11-30-2000
• Realtors caught in election confusion, 11-16-2000
• Pick up your commission at an ATM, 11-09-2000
• Insurance quotes now at the curb, 11-02-2000
• Auctions enjoying new-found popularity, 10-26-2000
• Election mojo and mortgages, 10-19-2000