As a new educator or if you're starting out in a new career, owning your own home is part of the American dream. Although California has some of the highest-priced homes in the country, according to the California Association of Realtors®, median prices are down and much more affordable than when home prices were peaking several years ago.
Selected median prices as of June 2009 compared with June 2008*
| Contra Costa County | $250,000 (down 33.3%) |
| El Dorado County | $316,000 (down 17.7%) |
| Fresno County | $160,000 (down 27.3%) |
| Los Angeles County | $325,000 (down 23.5%) |
| San Francisco County | $635,000 (down 15.8%) |
| San Luis Obispo County | $390,000 (down 16.1%) |
| Santa Clara County | $455,000 (down 30.0%) |
| San Diego County | $310,000 (down 17.1%) |
In addition, there are many programs available to assist first-time homebuyers. They include:
- A federal tax credit of up to $8,000 for first-time homebuyers who sign a binding contract before May 1, 2010, and close before July 1, 2010. In addition, certain repeat homebuyers who sign a binding contract before May 1, 2010, and close before July 1, 2010, may be eligible for a tax credit of up to $6,500. Details are available at the IRS Web site.
- A
first-time homebuyer program provided through a CTA-endorsed credit
union, First Financial Credit Union (see more information below).
- Special programs to assist teachers who serve certain schools to purchase homes (see more information below).
Tips for Saving
Putting
money down on a home has several advantages: you may be able to secure
a lower loan rate, enjoy smaller monthly payments and, in some cases,
avoid paying private mortgage insurance.
But accumulating a
substantial sum – say, 15% or more of the purchase price – will take
time and discipline. Here are some suggestions to make saving easier.
Formulate a plan.
Once you decide how much you want to save and how quickly you want to
save it, break it down into manageable goals. For example, if you want
to save $15,000 over three years, you would need to save $400 a month
in an account earning 3% interest.
Make it automatic. Save effortlessly by requesting that a portion of your paycheck be automatically transferred to your savings account.
Spend less.
Buy fewer clothes, eat out less often, hold off on buying a new car,
cancel your cable service and seek out free sources of entertainment.
Funnel the savings into your down payment fund.
Save more.
Depositing raises; extra duty, coaching or summer pay; and tax refunds
directly in your savings account can be a painless way to save. When
you pay off a loan, continue to make the payments to yourself.
Homebuyer Resources
Be sure to check out these valuable resources if you're in the market for your first home:
- Download the Glossary of Mortgage Terms (PDF) to help you with your research.
- Your
membership in CTA offers benefits such as affordable home loan rates
and a first-time homebuyer program through First Financial Credit
Union. First Financial's First Time Home Buyer Program offers up to
100% financing on first home purchases and a special competitive
mortgage rate with even lower rates for members working in "high
priority" schools. In addition, although private mortgage insurance
(PMI) is usually required for individuals buying a first home or making
a down payment of less than 20%, CTA members qualifying through the
First Time Home Buyer Program may not need to purchase PMI. To learn
more, go to www.cta.org, or visit First Financial Credit Union, or call (800) 537-8491.
- Review the low loan rates and special features of the CalSTRS Home Loan Program.
- Check out the competitive rates and terms available at Provident Credit Union's Mortgage Loan Center.
- The
California Housing Finance Agency offers the Extra Credit Teacher
Program, designed to help eligible teachers, administrators, staff
members and classified employees who serve in high priority schools
around the state purchase their first homes. The program offers
low-interest-rate financing and down payment assistance. To learn more,
visit www.calhfa.ca.gov or call (877) 9.CalHFA (877-922-5432).
- There are other programs, such as housing assistance for teachers in the San Francisco Unified School District . Check with your district to see if there are special programs available locally.
* Source: June 2009 Median Prices, California Association of Realtors, www.car.org.
Monthly Mortgage Payments With and Without PMI
In
many cases, you will be required to purchase private mortgage insurance
(PMI) if your home down payment is less than 20%. Following is an
illustration of how various down-payment amounts can affect your
monthly mortgage payment, based on a home value of $450,000 and a
fixed-rate, 30-year mortgage at 6%. These calculations are for
illustration only; your situation will depend on the value of the home
your purchase; the type, term and interest rate of the mortgage; and
the amount of your down payment.
| | 20% down | 10% down | 5% down |
|---|
| Down payment amount | $90,000 | $45,000 | $22,500 |
| PMI required | No | Yes | Yes |
| Monthly payment* | $2,158 | $2,428 | $2,563 |
* Includes principal, interest and PMI for 10% and 5% down payment illustrations. No property taxes are included in the estimates.