Calling all teachers! Do you know about CalSTRS?

OCCOASTPROPERTIES reports:

The CalSTRS program is a great benefit to qualified members helping them get into thier dream homes! See below to see if you qualify!


What is the Cal STRS Program?

The CalSTRS Home Loan Program consists of agreements with lenders who provide 30-year and 15-year fixed-rate loans for the purchase and refinance of single and various multi-family dwellings. These loans are purchased by CalSTRS.
Bank of America Home Loans, who serves as the program administrator, will be the servicer for all CalSTRS loans.

What are the loan limits?

Loan limits can vary from $417,000 to $521,250 depending on the program.

What are the interest rates?

Although quoted interest rates for applications will change with market conditions, once your loan closes, the interest rate will be fixed for the term of your loan.

Am I eligible to apply for a mortgage throught the CalSTRS Home Loan Program?

Eligibility requirements include the following:

• Employees of California public school districts or California community colleges.
• Members of the California State Teachers’ Retirement System.
• CalSTRS employees.
• Inactive CalSTRS members as long as they have funds in their CalSTRS retirement account.
• Retirees receiving CalSTRS benefits.

Are their any restrictions?

Yes. Some of the restrictions are:

• The home must be the borrower's primary residence.
• The home must be located in California.
• For the 80/17 Program, borrowers and/or their spouse may not own any other properties

What are the features of the 80/17 program?

With the 80/17 Program, the borrower will sign two notes:

• The first note is for a fixed rate 30 year first mortgage for 80% of the total borrowed amount.
• The second note is for a fixed rate deferred second mortgage for 17% of the borrowed amount. This secondary financing for the down payment carries the same fixed rate as the corresponding first mortgage. Payments on the 17% second mortgage are deferred for the first five years of the loan (although the borrower is allowed to make payments during this period). At the beginning of the sixth year, accrued simple interest on the second mortgage will be added to the second mortgage’s balance, and the second mortgage will then be amortized using compound interest over the remaining 25 years. The borrower will make monthly principal and interest payments for the remainder of the mortgage term.
• The combined loan-to-value (LTV) ratio is 97% (80% LTV on the first mortgage and 17% LTV on the second mortgage).
• A 3% down payment is required. A minimum of 1% must come from the borrower's own funds. The remainder may come from a gift from a relative where repayment is not required or a grant from a government agency or an employer - assisted housing program, which has been approved by Bank of America Home Loans.
• Term – Both the first and second mortgages under the 80/17 Program have a 30 year term. The second mortgage has a five-year deferred payment structure.
• Interest Rate - Both the first and corresponding second mortgage carry the same fixed interest rate.
• Closing Costs - The closing costs and prepays can be paid from following sources:
  • Borrower's own funds
  • Seller contributions up to 3%
  • Gift from relative
  • Unsecured grant from a government agency or an employer - assisted housing program, which has been approved by Bank of America Home Loans.

The borrower (after closing) must have available cash reserves that equal at least two monthly mortgage payments. Funds from individual retirement accounts (IRA/Keogh accounts) and tax-favored retirement accounts (401k accounts) may be considered as cash reserves.

My existing loan is not a CalSTRS mortgage, can I refinance it with a CalSTRS home loan?
You may refinance your existing “non-CalSTRS” mortgage using the CalSTRS Conventional Standard Program; however, the 80/17 Program is for purchases only.

Can I refinance my existing CalSTRS home loan?
Refinances are allowed with the CalSTRS Conventional Standard Program.
Borrowers with conforming CalSTRS 80/17 or 95/5 mortgages may be eligible to refinance using the Home Affordable Refinancing Program (HARP) only, part of the federal government’s Making Homes Affordable (MHA) initiative. This program applies to qualifying first mortgages only, not second liens. The previously offered non-conforming mortgages under the 80/17 or 95/5 program are not eligible.

Does CalSTRS have a mortgage program  that will allow me to use portion of my pension fund for a down payment?

CalSTRS does not offer a mortgage program that involves the usage of any portion of your CalSTRS pension funds. Instead, we offer the 80/17 Program, which does not put any portion of your retirement funds at risk.

Am I required to have Mortgage Insurance (MI) with a CalSTRS home loan? Can't I decline Mortagage Insurance and take out a term life insurance policy in lieu of MI?

Lenders require MI protection for first mortgage liens with loan to value ratios over 80%. MI protection has nothing to do with your health, life or death. MI reimburses the lender, while a mortgage life insurance policy is designed to protect the survivor by furnishing cash to pay off the loan should you or your spouse die.
While you do have a choice with a life insurance policy, it will not absolve you of the requirements of MI insurance, particularly if you are participating in the CalSTRS Home Loan Program.
With the CalSTRS 80/17 Program, the first lien represents 80% of the loan to value; therefore, MI is not required.

What other insurances should I be aware of?

Title Insurance — This is included in the closing costs to insure that no other party can claim title to your property, protecting you and lender against such a claim.
Hazard Insurance — A contract that protects you from any financial losses on your property that might result from fire, flood or any other hazards.
Mortgage Life Insurance — Like Term Life Insurance, only this policy pays off your mortgage in the event of your death.

If you are interested in more information regarding this type of loan, please contact us or feel free to call our Bank of America MSA, Gary Barker at 714-348-3399

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