San Diego Teachers Home Loan

San Diego County teachers can buy a home, with a down payment requirement as little as 3%, using a little known loan program offered by their State retirement plan.  The San Diego Teachers Home Loan is less expensive than the traditional FHA mortgage option because it avoids mortgage insurance and combines a first and second mortgage.  Rates are competitive and loan amounts go as high as $650,000.

The beauty of this home loan program lies in the second mortgage.  The first mortgage is an 80% loan, made by participating lenders.  The second mortgage is a 17% mortgage, made directly by the State retirement fund, at the same rate as the first mortgage.  Payments on the second mortgage can be deferred up to five years, allowing for newer teachers to "grow into their payment" as their income escalates through tenure.   

Here is a comparison of the San Diego Teachers Loan to traditional FHA financing, for a $400,000 purchase price:

Down payment= $12,000

FHA mortgage payment at 6.375%, with upfront mortgage insurance premium of 1.5%, and monthly mortgage insurance premium of .55%:

Principal and Interest:                  $2,458
Monthly Insurance Premium:              150
Taxes:                                             416
Hazard Insurance:                              75

TOTAL FHA PAYMENT:                $3,099

San Diego Teachers Loan Program payment, at 6.625%, for first and second mortgage:

Principal and Interest (1st):          $2,048
Principal and Interest (2nd):              435
Taxes:                                             416
Hazard Insurance:                              75

TOTAL TEACHERS LOAN PMT:      $2,974

While the interest rate is higher on the San Diego Teachers Loan Program, the avoidance of mortgage insurance affords a monthly mortgage payment that is over $100/month less.  The option of deferring the second mortgage payment can help teachers own a home while "deferring" the second mortgage payment some five years.  There is no such thing as a free lunch, however.  Deferring that second mortgage payment will add some $30,000 to the mortgage balance, by 2013.

Interest deferral should be used only with the belief that San Diego County real estate values will be some 10% higher, in 2013, than they are today.  Recent news reports might suggest that possibility exists.