New Bill Proposed to Help Teachers and First Responders Buy Homes

A new proposal could make it easier for these professionals to purchase a home.

There are several hurdles prospective homeowners need to jump to buy property: find the ideal home, qualify for a mortgage, and come up with funds for a down payment. The last can be extremely challenging for potential buyers with limited savings, but the reality is that many people can afford a monthly mortgage payment -- they just can't afford to come up with a huge pile of cash at closing.

There is already a loan program for borrowers who find a down payment a challenge: VA loans. These loans don't require funds at closing. But as the name implies, these mortgages are limited to active military members, U.S. veterans, and their surviving spouses.

Now lawmakers are proposing a new mortgage program similar to the VA loan program. And if it becomes law, it could benefit teachers and first responders in a big way.

More borrowing options for some professionals

On May 13, U.S. Representatives John Rutherford (Florida), Al Lawson (Florida), John Katko (New York), and Bonnie Watson Coleman (New Jersey) introduced the Homes for Every Local Protector, Educator, and Responder Act. Under this bill, teachers and first responders would be eligible to finance a home with no money down, similar to how VA loans work.

Like the VA loan program, which has a funding fee, this new loan program would require borrowers to pay an up-front mortgage insurance premium equal to 3.6% of a loan's principal. However, borrowers would not have to pay ongoing mortgage insurance premiums. (This is different to FHA loans, which allow borrowers to buy with little money down, but require up-front and ongoing mortgage insurance premiums).

Those eligible for the new loan program would include:

• Teachers at public and private schools
• Police officers
• Firefighters
• Paramedics
• EMTs
• Prison guards

To qualify for the loan program, borrowers must have worked in these professions for at least four years. They must also prove they're in good standing with employers, and they intend to stay in the same type of job for at least another year.

Opening the door to homeownership

In today's housing market, where inventory is extremely limited and home prices are inflated, coming up with a down payment can be even more challenging. While there are existing programs, like FHA loans, that allow for a low down payment (as low as 3.5%), some people can't afford to fork over money at closing unless they deplete their cash reserves, leaving no funds for home repairs or other emergencies. If this new loan program comes to be, many public service professionals will have a much easier time becoming homeowners -- and enjoying the financial stability that comes with it.