Zero-Down Mortgages Are Being Snapped Up by State’s Teachers

A zero-down-payment mortgage program for California’s public schoolteachers has topped $140 million in volume in less than a year, according to Freddie Mac and the California State Teachers’ Retirement System.

Since it was introduced last spring, the CalSTRS Home Loan Program’s zero-down mortgage option has enabled about 1,429 teachers and other school employees to buy homes.

CalSTRS was one of the nation’s first public pension funds to become a Freddie Mac seller/servicer. CalSTRS sells mortgages to Freddie Mac and uses the proceeds to finance new mortgages for teachers through a network of lenders and credit unions.

The California Department of Education estimates that the state must recruit 300,000 teachers in the next 10 years. Teacher salaries average $46,129, while average home prices range from about $120,000 in San Bernardino County to more than $350,000 in San Jose, according to Freddie Mac.

The CalSTRS zero-down program is offered through a partnership between CalSTRS and the California Housing Loan Insurance Fund.

A first mortgage with a 95% loan-to-value ratio from a credit union or commercial lender is combined with a 5% deferred-payment second mortgage from CalSTRS.