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Teacher Next Door Program (TND)

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The Teach Next Door (TND) Program is available through MOHCD Approved Participating Lenders Only

Click here for the Participating Lender List

 

PROGRAM OVERVIEW

The Mayor's Office of Housing and Community Development (MOHCD) administers the Teacher Next Door (TND) Program to assist teachers employed with the San Francisco Unified School District (SFUSD) with the purchase of their first home in San Francisco.  Applicants to the Teacher Next Door loan program must:

  • Be purchasing their first home within the boundaries of the City and County of San Francisco
  • Be currently employed as a full time teacher with the San Francisco Unified School District
  • Have a combined household income of no more than 200% of the AMI for SFMSA.
  • Include a certification of a California teaching credential and Letter of Employment from the San Francisco Unified School District with the TND application.

Borrower Eligibility
Property Eligibility
Maximum Loan Amount
Loan Terms
Loan Documents
Owner Occupancy Requirements
Application Process
Review and Processing
Participating Lenders
Homebuyer Education Counseling Agencies

 

BORROWER ELIGIBILITY

To be eligible for a TND loan, a borrower must be a credentialed teacher currently employed by the San Francisco Unified School District, and have a combined household income of no more than 200% of the AMI of SFMA.

First-time homebuyer: Borrower must have never owned property in San Francisco, either as a primary residence or an investment property.

Meet Income Limits: Maximum Household income is up to 200% of AMI.

Current Year Maximum Income Limits as of January 1, 2014 (PDF)
Please note:

  • The combined income of all household members who will be living in the property must be included in the determination of income. The combined household's income must be projected as an annual income. It should be assumed that the current income would continue for the next 12 months, unless there is verifiable evidence to the contrary.
  • Household income requirements will include all income of persons 18 years old or older who will be living in the property. Maximum loan limits are tied to the household income category.

Asset/Reserve Limitation: The combined household liquid assets after purchase the property cannot exceed $60,000. Liquid Assets includes all source of monies from savings, checking accounts, gift funds, cash received from settlement or inheritance, investments and properties held by any member of the Borrower's household including minors and any fund is available for liquidation to purchase property. Liquid Assets do not include funds held in pension accounts, retirement funds, 401(k) plans, or similar assets which are not available for liquidation without substantial financial penalty to the Borrower.

Liquid Asset Restrictions:  Prior to purchase, a borrower household may hold no more than $200,000 in liquid assets.  This includes all sources of liquid assets and gift funds. After purchase, the maximum liquid assets held by a household must not exceed $60,000

Minimum Down payment: Borrower must contribute minimum of five percent (5%) of the purchase price toward the downpayment of the property. Of the total 5%, 3% must come from the Borrower’s own funds from a verifiable source (held in a financial institution) and 2% can be grant or gift funds (not TND funds). Borrower must have sufficient funds to meet the required down payment plus necessary reserve funds as well as sufficient income to meet the monthly mortgage payments, property tax, homeowner insurance and homeowner association dues. Borrower is limited to a total down payment of 50% towards the purchase including any loan from the City. The borrowers 5% contribution shall be applied as downpayment and not as closing costs.

Post Purchase Reserve Funds: Borrowers using TND must have a minimum of three months total monthly housing expenses after purchase. Some borrowers may qualify for first-mortgage financing with fewer than three months reserves. Recognizing that the financial circumstances of each homebuyer are unique and that there may be other factors besides 3 months reserves that reflect the borrowers ability and willingness to repay mortgage loans, the MOHCD may consider 2 months reserves if two or more of the following indicators are present:

a) Proven ability to devote a larger amount of income to housing expenses. The borrower has successfully demonstrated an ability to make mortgage or lease payments for twelve consecutive months that are equal to or greater than the proposed monthly payments for the housing being purchased;
b) Substantial net worth as demonstrated through non-liquid assets and retirement accounts;
c) FICO credit score greater than 700;
d) Demonstrated potential for increasing his/her earnings;
e) Housing expense will not increase more than five percent over previous housing payments.

Homebuyer Education Requirement: Borrower will be required to complete a first-time homebuyer education course through one of MOH's 5 approved housing counseling agencies (see below). A certificate of completion of homebuyer education must be included with the application package.

Primary Financing: Borrowers who apply for a TND must be able to qualify for a first mortgage from a Participating Lender prior to submitting an application for a TND loan. Borrowers must have sufficient funds to meet the required down payment, and necessary reserves as well as sufficient income to meet the escrowed monthly mortgage payments.

First Mortgage Requirements: The first mortgage loan must be 30 year, fixed rate mortgage, the mortgage payment must be fully amortizing. Loan Type not allowed: reverse mortgage, stated income, ARM – adjustable rate mortgage, interest-only, negative amortizing, and balloon payments

Debt-to-Income Ratio: Borrowers monthly housing debt, including property taxes, property insurance, and if applicable mortgage insurance and homeowner’s association dues cannot be less than 28% (front-end-ratio) of the household’s gross income. The front end ratio shall not be more than 40%. The ratio of monthly housing costs, plus all other household monthly debt (including credit cards, car payments, etc.) cannot exceed 43% (back-end-ratio) of the household’s gross income. 

Some Borrowers may qualify for first-mortgage financing at higher ratios than those cited above. Recognizing that the financial circumstances of each borrower are unique and that there may be other factors besides debt-to-income ratios that reflect the borrower's ability and willingness to repay mortgage loans, the MOHCD may consider higher ratios if two or more of the following indicators are present:

a) Proven ability to devote a larger amount of income to housing expenses. The borrower has successfully demonstrated an ability to make mortgage or lease payments for twelve consecutive months that are equal to or greater than the proposed monthly payments for the housing being purchased;
b) Substantial net worth as demonstrated through non-liquid assets and retirement accounts;
c) FICO credit score greater than 700;
d) Demonstrated potential for increasing his/her earnings;
e) Housing expense will not increase more than five percent over previous housing payments.

Lenders and Borrowers seeking MOHCD approval of higher debt ratios should submit a written request and a letter of explanation to MOHCD as part of the borrower’s loan application. The decision to approve or deny higher ratios will be made in accordance with the above stated compensating factors; however, the maximum back end ratio may not exceed 43%.

PROPERTY ELIGIBILITY

Properties purchased with TND funds must be single-family residences units in the City and County of San Francisco, which include: detached single-family house, condominiums and townhouses.

Property Size Requirements: The size of a household must be compatible with the size of the unit being purchased. A minimum of one person per bedroom is required. In other words, a single person may purchase a studio or a one-bedroom unit; a two-person household may purchase a two-bedroom unit; a three-person household may purchase a three-bedroom unit; and so on.

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MAXIMUM LOAN AMOUNT

The maximum loan amount available for TND loans is $20,000.

Maximum Combined Loan-to-Value Requirements: The maximum CLTV cannot exceed 95% of the purchase price, which includes the first mortgage, TND and any other borrowed subordinate financing. The minimum CLTV cannot be less than 50% of the purchase price.

If portion of TND loan will be used towards non-recurring closing costs, the CLTV cannot exceed 98%; the amount of non-recurring closing costs cannot exceed 3% of the purchase price. Borrower must contribute 5% towards the purchase price (3% borrower’s own funds and 2% can be gifts OR 5% in full from borrower). 
 

LOAN TERMS

The loan may be used for either closing costs or downpayment. There is no interest, nor shared appreciation. TND loans may be layered with DALP, City Second loans, and used for the purchase of BMRs, if the teacher also meets the income eligibility criteria for those programs. If the teacher moves out of the City and County of San Francisco or leaves the San Francisco Unified School District within 5 years of the date the loan is issued, the loan must be paid back in full. After year five, the loan is forgiven at a rate of 20% per year, and at the end of the 10th year, the loan is forgiven in its entirety. The chart below illustrates repayments for TND loans.

If the property is sold or the teacher leaves the SFUSD, then the following is due back to the City:

Year 1 $20,000

Year 6 $16,000

Year 2 $20,000

Year 7 $12,000

Year 3 $20,000

Year 8 $ 8,000

Year 4 $20,000

Year 9 $ 4,000

Year 5 $20,000

Year 10 $ 0

Refinance/Subordination: The City loan can be subordinated to refinance the existing first mortgage for a lower interest rate and better loan terms as long as no cash equity is taken out of the property. All refinances must meet MOHCD's subordination requirements and be approved by MOHCD. All borrowers must work with loan officers or lenders on our list of participating lenders for refinance. This ensures awareness of full restrictions on the property and expedites the request process.

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LOAN DOCUMENTS

The City will provide the required loan documents to the title company for borrowers' signatures:

TND Deed of Trust (pdf): The City Deed secures the loan against the title of the property. The City loan will subordinate to first mortgage.

TND Note (pdf): The City Note contains an acceleration clause, which will call the entire loan due and payable upon sale; rental and title transfer of the property. The City Note also outlines terms and repayments of the loan.

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OWNER OCCUPANCY REQUIREMENTS

Borrower must occupy the purchased property as its primary residence within 60 days after close of escrow. Properties that have received TND funding must remain owner-occupied throughout the term of the loan and never used as investments or rental property. Compliance monitoring may be performed and documented proof of occupancy required at intervals determined by Mayor's Office of Housing and Community Development.

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APPLICATION PROCESS

Borrower must complete the first-time homebuyer education course through one of MOHCD's 5 approved housing counseling agencies. A certificate of completion of homebuyer education must be included with the application package.

Work with your Realtor and Loan Officer/Lender to prepare the TND application package, including the following:

  • Have a ratified purchase agreement before applying for the TND loan
  • Submit TND application (TND-1) (download the TND application from our website) to lender at the same time you apply for your first mortgage along with the following documents:
    1. A certification of a California teaching credential and Letter of Employment from the San Francisco Unified School District
    2. Complete set of past 3 years Federal income tax returns (included all schedules, signed and dated) and W-2 forms
    3. Three current and consecutive pay stubs with year-to-date (YTD)
    4. Income Tax Affidavit (TND-3) - if applicable
    5. First Time Homebuyer Affidavit (TND-4)
    6. Homebuyer Education Certificate
    7. Last 3 months bank statement for checking, savings & other pertinent investment accounts
    8. Gift letter (if applicable)
    9. IRS form 4506-T

Lender will submit the TND application package to City and provide the following information along with the application:

  1. Primary Financing Loan Application (Form 1003 signed and dated by the borrower)
  2. Loan Analysis (Form1008)
  3. Approval or commitment letter from Lender
  4. A copy of the borrower's credit report
  5. Fair Market Appraisal
  6. Preliminary title report

A letter of approval or denial will email to the borrower and lender within 10 working days of receipt a complete package from the lender.

For additional information, please contact Mayor's Office of Housing and Community Development at 415-701-5500.

TND Application Forms (revised 1/14)


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REVIEW AND PROCESSING

  • MOHCD receives complete and bound application package in a legal size manila folder with two fasteners. (application package follows instructions from Transmittal Form).
  • MOHCD will email approval or denial letter to the lender within 10 working days of receipt of a complete package. Incomplete packages will be returned without review for approval.
  • Email notice includes draft loan documents and a request for buyer(s) to sign & date commitment letter, which must be returned to the City within 7 working days.
  • After MOHCD receives the signed commitment letter back from the buyer:
    • MOHCD will email escrow instructions and closing documents to the title company.
    • 7 working days funding period will begin.
    • Funding as specified in the commitment letter will be placed on reserve for a period of 45 days from date of the commitment. If for any reason, escrow cannot close within the commitment period, please notify the Mayor's Office of Housing immediately or the loan will be expired.
    • Funding will be wired to the escrow account after we have received and reviewed all closing documents. We require 3 working days for wire transfer.
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LIST OF PARTICIPATING LENDERS (click)

 

LIST OF HOMEBUYER EDUCATION COUNSELING AGENCIES (click)

 

 
 
Last updated: 4/14/2014 4:22:38 PM