Home Loan Program - Frequently Asked Questions

General Questions

• What is the CalSTRS Home Loan 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. Visit the Advantages page for information on how the CalSTRS Home Loan Program can serve you.

• How much can I borrow?

  Loan limits can vary from $417,000 to $834,000 depending on the program. Visit the Program Summary page for details of each program.

• What will be the interest rate?

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

• Are there any restrictions on the CalSTRS home loan?

  Yes. Some of the restrictions are:

  • The home must the member's primary residence.
  • The home must be located in California.

Insurance

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

  The lender requires MI protection unless your down payment is 20 percent of the loan value or greater. The 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.

• What other types of insurance should I know about?

  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.

Second Loans

• My loan has a CalSTRS deferred second. How does that work?

  The CalSTRS Down Payment Assistance Program has two Notes and two Deeds of Trust. The second Note is deferred for a five year period. During this five year period, no payment is required on the second loan. At the beginning of the sixth year, payment on the second loan and the accrued interest will begin to amortize and payments will begin until the loan is paid in full.

• Can my CalSTRS second loan be assumed?

  No, CalSTRS does not allow assumption of their loans.

• Do I have to pay back my second loan?

  Yes: Under CalSTRS Down Payment Assistant Programs, you will sign two Promissory Notes and two Deeds of Trust. Both loans will be secured by a recorded lien on the property.

  Both loans will become due and payable if you pay off the first loan by:

  • Selling the property
  • Refinancing the mortgage
  • At the maturity of the first mortgage, transfer title to the property

  These loans are not forgivable, nor do they go away after a period of time.

  The CalSTRS deferred second loan must be paid off when the first mortgage loan is refinanced.

  The CalSTRS second loan must be paid off when the first is refinanced.

Payoff Demands

• How do I obtain payoff information?

  It is recommended that you call the Payoff Demand Request IVR phone number - 800-669-5833. This system will automatically notify you of a change in the payoff amount.

  Or, if you prefer, you may:

  • Call the Customer Service Department - 800-669-6607
  • FAX the demand request to 805-577-3897
  • To submit a payoff payment to Bank of America Home Loans, please mail to us overnight (see "overnight mailing instructions") at the following address:
    

    Bank of America Home Loans
    Payoff Department, TX2-977-01-17
    5401 North Beach Street
    Fort Worth, TX 76137-2733

Payments

• Can I make payments on my "Silent" or "Deferred" loan(s)?

  Yes. Payments can be made by sending a check or money order to:
  

  Silent Second or Deferred Second (loans reserved after 7/26/2004)
  Bank of America Home Loans
  P. O. Box 10219
  Van Nuys, CA 91410-0219

  Make sure your name, property address, and loan number are on the check or money order so that we can apply it to the correct loan(s).

• Can I get payment coupons or a monthly statement for my second and third loan(s)?

  Since these loans are "Silent" or "Deferred" (no payments required) we do not issue coupons. You can call Bank of America Home Loans or e-mail ("Contact Us") a request for an Activity Statement and it will be mailed out to you. In addition, an Annual Statement will be sent to you each year.

• What are closing costs?

  Once a loan has been approved, the borrower is asked to go to settlement (or "escrow") to sign final papers and the loan process is then finished.

  There are certain closing costs (other than points) involved in closing a real estate transaction, which can amount to anything from 1.5% to 3.5% of your mortgage loan.

  For example, if your mortgage loan is $85,000, your closing costs could range from $850 to $2,550. These closing costs will be in addition to your down payment on the house. The lender will charge a fee, which is called the Origination Fee, to cover the administrative cost of processing your loan. This is usually a small percentage of the loan amount.

  Many loan types require you to deposit in advance for some items that will be due after closing. These pre-paid items usually include real estate taxes and first year insurance premiums for hazard and mortgage insurance. These fees are called Paid in Advance items or Prepaid Escrows. It is necessary for a title insurer to examine a title to make sure there are no problems that would prevent you from having a CLEAR legal title. It is then necessary to get title insurance in case someone else should try to claim title to your property.

  Fees for title examination and title insurance are included in the closing costs and are called Title Charges. A record of your home purchase will be placed on file with your local government. There is a small fee to cover the cost of paperwork. These charges by the local government are called Recording and Transfer Charges. The settlement or escrow fee covers the cost of a closing officer to prepare and review all of the documents needed to close your escrow.

  Each lender can provide you with a "Good Faith Estimate" of what your closing costs will be.

• How does the Zero Down Program differ from the other CalSTRS Home Loan Programs?

  Under the CalSTRS Zero-Down Preferred Program (95/5), the borrower will pay only the closing costs. Secondary financing for the down payment will come in the form of a deferred second loan. In other words, the borrower will sign two notes: one for the first mortgage of 95% and another note for 5%. The 5% is deferred because the loan payment is deferred for the first five years of the loan.

• How does the 80/17 Program differ from the other CalSTRS Home Loan Programs?

  Mortgage Loans made under this program are similar to those of the Zero-Down (95/5) Preferred Program with the following exceptions:

  • The maximum loan-to-value ratio will be up to 97% for purchases and refinances.
  • 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.
  • Interest Rate - The interest on the second mortgage is deferred simple interest for the first five years of the loan.
  • 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.

  Secondary financing for the down payment will come in the form of a deferred second loan. In other words, the borrower will sign two notes: one for the first mortgage of 80% and another note for 17%. The 17% is deferred because the loan payment will be deferred for the first five years of the loan.

• How does the deferred second work?

  The borrower does not have to repay on the second note for the first five years of the loan. However, the second note will have accruing interest that will be added to the principal balance at the end of the five-year deferred period. The new second mortgage loan balance will then be amortized with regular monthly, principal and interest payments due.

  Under both programs, the interest rate on the second mortgage loan is the same rate as the first mortgage. If the home is refinanced or sold at a later date, the second note must be paid in full. Additional information on deferred second notes is available on this site.

Loan Application Process

• What documents are needed to process my loan?

  Certain documentation will be required to support your application. Generally, the higher your down payment, the less documentation will be needed.

  Documentation may include:

  • Credit reports
  • The loan application
  • An appraisal of the property
  • Income verification
  • Asset verification
  • Various other documents depending on the complexity of your personal financing situation

  
  
• What counts in the loan application process?

  Your Income - The amount of income you make will determine the amount of money you can borrow to purchase your home. For example, if a person makes $5,000 a month and spends $1,600 on a mortgage loan, including property taxes, mortgage insurance and hazard insurance, the housing expense ratio is 32% (1,600 divided by 5,000). Normally, 33% of your income is the general rule to be spent on your mortgage, but this can vary depending upon the amount of down payment (or equity for a refinance loan), your credit history, etc.

  Your Debt - Mortgage companies and banks will look at your monthly debts such as loans, charge cards, child support, etc. made monthly by you. The percentage of debts to income is known as the debt-to-income ratio. A good goal is to spend about 38% of your income on all debts, including the contemplated new mortgage payment.

  Your Employment History - Mortgage lenders or banks are more likely to lend money on more favorable terms to people who have worked several years at the same job or the same type of job. A verification of employment document may be requested to verify your work history.

  Your Credit History - Each borrower has a credit history that is on file with many different Credit Reporting Agencies. The credit report is used to determine your ability and willingness to pay your debts as a borrower. If you have been late on your various payment obligations, the late payment will show up on a credit report. Each person's credit history is unique, but generally the better the credit history, the better the loan terms.

  Property Value - The mortgage company or bank will want to know the value of the prospective home. The loan amount approved will depend on the value of the property to be determined by a certified and licensed real estate appraiser. This is to ensure that the asset is worth the money that you will borrow.

• What does it mean to have 0, 1, or 2 points?

  A point is one percentage of the loan amount. The lenders offer rates that may be lower, but require paying points.

  A rate of 7.875% with 1 point for a loan of $100,000 would require the borrower to pay a total of $1,000 to the lender upon closing of the loan. A rate of 8.000% with 0 points will require no payment to the lender, but the interest rate is slightly higher.

  Points will lower the interest rate and are of most benefit if you intend to keep the loan for a long time. Under the CalSTRS Program, the borrower will not pay discount points because buy-downs are not allowed.

• How do I find out more about the CalSTRS Home Loan Program?

  Visit one of the Approved Lenders or our web page for more information and updates.

  You may also call our toll free Home Loan Program Administrator at 866-384-4HLP (4457).

• How do I get started?

  On the list of Approved Lenders, select your county and choose a local lending office. Call your chosen lender and ask for a loan agent who can help you with the CalSTRS Home Loan Program.

  You can also contact the CalSTRS Home Loan Program Administrator at 866-384-4HLP (4457) or by email at CalSTRSHLP@bankofamerica.com.

Reverse Mortgages

• Does CalSTRS offer a Reverse Mortgage program?

  CalSTRS offers a reverse mortgage program to qualified members and their parents through Bank of America Home Loans.

  Reverse mortgages have become financial solutions for many seniors 62 years and older. They allow homeowners to remain living in their homes while supplementing their retirement income. This site offers Reverse Mortgage Information Links for further information about this program.

  For information about reverse mortgages, product availability and the special offer Bank of America Home Loans has made available to our members, call 866-384-4457.

• What is a Reverse Mortgage?

  A reverse mortgage allows homeowners 62 years of age and above to access their home equity without having to sell their property or make monthly mortgage payments.

  The homeowner continues to be responsible for:

  • Property taxes
  • Insurance
  • Home repairs.

  Borrowers can choose to receive their reverse mortgage funds in monthly payments, a lump sum, as a line of credit the borrower may access as needed or a combination of these options.

  Reverse mortgages do not require repayment for as long as the borrower lives in the homeas the primary residence. Once the last borrower dies, sells the home or permanently moves out, the loan becomes due and must be paid in full. Reverse mortgages are non-recourse loans which means that neither the borrower nor their heirs will owe more than the appraised value of the home when the loan becomes due.

  With a reverse mortgage, the title remains in the borrower's name and they retain ownership of their home.

• What Can a Reverse Mortgage Be Used For?

  A reverse mortgage can provide borrowers with the means to:

  • Supplement their monthly income to cover health care costs
  • Pay off existing mortgages or other financial obligations
  • Make home repairs or modifications
  • Gain peace of mind.

  Since the proceeds from reverse mortgages are not considered income, they are typically tax-free and do not affect Social Security, Medicare or pension benefits. However, it is always a good idea for potential borrowers to consult with their financial or tax advisor for more information.

• What are the typical costs involved in obtaining a Reverse Mortgage?

  You can expect to pay some of the same fees as you do with a regular, or forward mortgage, including:

  • Title or escrow fees
  • An appraisal fee
  • A document preparation fee.

  In addition, almost all lenders charge an origination fee, which can vary by lender and by the type of reverse mortgage product. FHA's Home Equity Conversion Mortgage (HECM) also requires a mortgage insurance premium.

  Depending on the reverse mortgage product, there may also be a monthly servicing fee, which can range from $30 to $35 per month.

  In most cases, the fees involved in obtaining a reverse mortgage can be "financed," that is, they can be paid from the proceeds of the loan. The appraisal fee is typically the only expense the borrower is required to pay "out of pocket."

  It is important to shop around and compare costs. Reverse mortgage lenders should provide you with a total amount loan cost or TALC rate, which is the projected annual average cost of a reverse mortgage, including all itemized costs. As more lenders enter the reverse mortgage marketplace, there should be more competitive costs associated with these programs.

  This site offers Reverse Mortgage Information Links for further information about this program.

• Does CalSTRS offer a Mortgage program that would allow me to use a portion of my pension fund balance as 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 Zero-Down, 95/5 and the 80/17 down payment assistance programs, which do not put any portion of your retirement funds at risk.

SMARTMOVE Services

• How do I find a qualified real estate agent to help me purchase a home? Does CalSTRS offer any kind of real estate assistance?

  CalSTRS now offers the services of SMARTMOVE® to provide you with the opportunity of receiving high-quality, professional real estate assistance and CASH REBATES.

  When you contact a SMARTMOVE Coordinator, you will receive a knowledgeable counselor serving as your advocate and central contact throughout your transaction. Based on your needs, your SMARTMOVE coordinator can match you with a real estate professional in your current area to help you sell your home and a real estate professional at your destination to help you find your new home. All real estate professionals in the program are experienced and have been specially trained to offer the quality of service required by CalSTRS and SMARTMOVE.

• How can I find out more information about SMARTMOVE?

  You can call SMARTMOVE at 888-778-2168 and mention you are a member of CalSTRS, and have applied for a CalSTRS Home Loan. A SMARTMOVE Coordinator will explain the program guidelines in order for you to qualify for a cash rebate. Whether you are buying or selling, you will receive a cash rebate for EACH transaction. **

  **(This program is available nationwide. Although rebates are prohibited in some states, members are eligible to receive real estate services. In some cases, rebates on new construction purchases are calculated on base price, not upgraded price).