The CalSTRS (California State Teachers Retirement System) offers a great 97% loan program. It is actually a "80/17" program, where the 17% is a Silent 2nd with deferred payments for the first 5 years of the loan. For California teachers who are eligible, and in my market, First Time buyers in Orange County who are teachers, this is a great alternative to an FHA loan.
A 3% down payment is required, but only 1% is needed from the borrowers own funds. The 17% Silent 2nd, which will have an interest rate equal to the interest rate on the 1st mortgage, eliminates the need to have mortgage insurance, which will save quite a bit of money.
Without getting into the numbers too much, on a purchase price of $400,000, the difference in monthly payments between an FHA loan with 3% down and a CalSTRS loanwith 3% down is approximately $221 in favor or CalSTRS. This is even assuming that the buyer decides to make the full P&I payment on the silect 2nd. If the buyer wants to defer the interest on the 2nd, the monthly payment on the CalSTRS program would be approximately $628 per month less than an FHA loan scenario. That's a lot of cash for the monthly budget.
First Time Buyers should always review all of their options. I am finding a lot of teachers who are in the market to buy their first home, and this is an important program for them to consider.
For more information, feel free to contact Tim Storm with Home Point Financial at 949-829-1846.