Max Down Payment is 3% of the Purchase Price with the 80/17 Program
Keep in mind with the 80/17 CalSTRS Home Loan program you are only allowed to put 3% down payment, no more. Most programs allow you to put more down if you want to purchase a more expensive home. For example, if you were approved for a purchase price of $500,000, you would put $15,000 down and get a $400,000 first mortgage and an $85,000 deferred second mortgage. If you wanted to purchase a home for $510,000 and thought you could just increase your down payment to $25,000 and purchase the home, you could not use the 80/17 loan program. The maximum amount you could purchase would be $500,000.
Since the 80/17 program offers a deferred 17% loan with no payments for 5 years, borrowers are not allowed to put more than 3% down to increase their purchasing power. For borrowers who would prefer to put more down, they should probably go with the conventional CalSTRS programs.
How Does the 80/17 Measure Up to Conventional Financing?
The CalSTRS program does offer traditional conventional financing with loan amounts up to $834,000 as well as the 80/17 deferred second loan plan for loan amounts up to $650,000. Because the 17% deferred loan is not factored into today’s affordability, you can afford 17% more than you would be able to afford with conventional financing.
For example, a borrower who qualifies for a $500,000 purchase price with the 80/17 CalSTRS program would only qualify for a $435,000 purchase price and have to put down 3.5% down with an FHA loan. So, for borrowers who don’t have at least 10-20% to put down, the 80/17 program is usually the best option.
Ready to Explore How Much You Can Afford with CalSTRS?
Call us at (650) 520-0915 or email us today and we will arrange a free, no obligation consultation to explore your financial situation and how you can best position yourself to finance your home.
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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