The California State Teacher’s Retirement System (CalSTRS) created a home loan program for teachers back in 1984. I used to do a lot of them until the market went crazy and prices drove everyone into stated income loans. However prices are retreating to more affordable levels again, and CalSTRS restructured its program to be significantly more helpful

CalSTRS now offers a trio of programs. The Standard Conventional and the Zero Down % programs are solid performers, but the stand-out in the group is the “80/17” loan. Here’s why:

The 80/17

The 80/17 provides a combo 1st and 2nd that totals 97% of the purchase price. The 1st is 80%, eliminating PMI entirely. The 17% 2nd loan carries the same rate as the first. Both are set by PERS and are 6.625% today. But here’s the cool part—payments are deferred for 5 years on the 2nd! Simple interest accrues—no compounding—and the borrower begins making amortized payments in the sixth year…

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