The CalSTRS 80/17 home purchase loan was suspended in October of 2011 in a sudden move that left many California educators and public school employees without their housing benefit.
Now that the dust has settled somewhat in the real estate industry and home prices (and interest rates) are back on the rise, we look forward to seeing just exactly CalSTRS is planning.
On March 28th, 2013 CalSTRS announced that they had secured a new master servicer for the program. There is a process that needs to take place before a home loan program will be available.
The estimated launch of the new CalSTRS home loan program is expected in September 2013, will it happen?
Along with the logistical challenges of underwriting, funding and delivering the new CalSTRS loans, the new master servicer is working closely with CalSTRS to create loan programs that will benefit eligible homeowners.
Having spoken to the administrator for the program, I am optimistic that we will see the discounted mortgage insurance program that CalSTRS announced in 2011 just before the suspension of the 80/17.
New CalSTRS Home Loan Program
Prior to, and even after the CalSTRS 80/17 was discontinued, the new home loan program was introduced, and then sometime later it was updated to more accurately reflect the terms of the proposed program.
|Home Buyer Focus||Employees of a California public school district, community college, member of CalSTRS or CalSTRS employees|
|Eligible Properties||Owner-occupied single family residence (1 unit only). Purchase only, no refinance. Primary residence only|
|Term||30 Year Fixed (1st mortgage only)|
|Loan Amount||Generally up to $417,000. $625,00 for FHFA designated high-cost areas|
|Loan to Value||97%|
|Origination Fee||Up to 1.00%|
|Interest Rates||Fixed interest rate. Set daily by CalSTRS|
|Rate Lock||45 days, one free float down|
|Minimum FICO||To be determined. Proposed is 680, 720 for Condos|
|Mortgage Insurance Requirement||18% coverage required. Negotiating a discount with insurance providers will likely affect the minium FICO offered. The proposed rate is reduced.|
|Income Limits||Up to 140% of Average Median Income, unless property is in an “underserved” location.|
Is There a CalSTRS Advantage?
The advantage of using a CalSTRS 80/17 loan to purchase a home was that the loan program did not exist anywhere in the market, and was therefore completely unique employees of California public schools, school districts and community colleges.
Now that the 80/17 is gone, I am unsure if there will be a great advantage to using the CalSTRS loan since the loan program they are describing is already available for the most part.
Fixed Rates & Fees
CalSTRS has always set the rates and fees on these programs and published them on their website. The great thing about this is the transparency of never having to guess what the interest rate.
The down side has always been that CalSTRS interest rates are slightly higher than what the market offers. With the 80/17 loan, that was ok because it was not possible to get the loan anywhere else.
With the new CalSTRS program, it’s going to be interesting to see if they can differentiate this new program with the exact same loan program that is currently available.
45 Day Lock With Float down
When locking a CalSTRS loan, it is locked for 45 days. Compared to the a typical 30 day escrow, this gives you a little bit of wiggle room if it comes down to the wire.
If you’re submitting your offers asking for a 45 day escrow, it could hurt your chances of getting your offer approved. In the past, the CalSTRS home loan program was no more difficult than any other loan and could typically close in 30 days or less.
Should I Wait?
The question that I seem to answer the most these days is….should I wait until October to buy?
While it’s a great question, there really isn’t a “right answer”. If I were to answer this question based solely on the CalSTRS home loan program that’s being proposed, my answer would be no, don’t wait.
Not waiting doesn’t necessarily mean to buy a home right now, I mean don’t wait until the program is announced to get qualified.
This loan program already exists. We call this program the Broadview Community Access loan.
If you think you’re in the market to purchase a home in 2013, time is not on your side. With interest rates and home values increasing, waiting could cost you money and hurt your buying power.
My recommendation is to get pre-approved for financing now. If you qualify for one or more loan programs, at least you have a starting point. See how the market moves. If rates and values continue to soar up, you might want to get more aggressive and try to buy as soon as you can.
If you’re not afraid of being priced out of a neighborhood or rates going up too high, then be patient.
Even if the new CalSTRS home loan program isn’t introduced in October 2013, I can’t imagine it will be much longer before we see good things from CalSTRS.
I will keep an eye on the CalSTRS home loan program and keep you updated if we hear anything new!