What is the NACA program?
The Neighborhood Assistance Corporation of America (NACA) is helping remove some of the homeownership barriers for needy borrowers.
A NACA mortgage does not require a down payment or closing costs. And the demands on borrowers – like creditworthiness and income limits – are very lenient.
This nonprofit group has helped thousands of families find affordable housing so they may be able to help you too. Here's what you should know.
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NACA's Best Mortgage in America
NACA Best in America Mortgage is a program designed to help low- and middle-income borrowers realize their dream of owning a home.
This non-profit organization is owned by the U.S. Department of Housing and Urban Development (HUD) has set itself the goal of helping economically disadvantaged families buy a house.
The program is unique from other mortgage programs in that borrowers can buy a home with:
Low CreditNo Down PaymentNo Closing CostsNo Personal Mortgage Insurance (PMI)
NACA borrowers also get lower mortgage rates, which can help lower their monthly mortgage payments and make home ownership more affordable.
Requirements for the NACA program
Buying a home with no down payment or closing fees likely sounds like a pretty good deal. It may even sound too good to be true.
The catch? This program is not available to everyone. To qualify for NACA's Best in America Mortgage program, borrowers must meet certain eligibility requirements.
Here's an outline of what you'll need:
Most mortgage programs typically require you to have a credit rating of at least 580 to 620 to qualify.
NACA, on the other hand, does not rely on credit scores. Instead, the program examines your payment history for the last 12 months. NACA wants to see that you have consistently paid your rent and other obligations on time over the past year.
You may be able to get a low score mortgage provided you meet other credit requirements.
Although NACA helps economically disadvantaged homebuyers, the program does not set any income limits for households.
However, borrowers with incomes that exceed the median income for their region can only use the program to purchase homes in “priority areas”. These are low to middle income communities.
However, if a buyer's income is below the local median income, they can buy a home anywhere in the area.
The purchase price of a NACA house must not exceed the corresponding credit limit for an area. In 2021, the limit for a single family home is $ 548,250 in most areas and $ 822,375 in high-cost areas.
As a general rule of thumb, your total monthly debt payments – including your future mortgage payment – should not exceed 40 to 43 percent of your gross monthly income. This is known as your debt-to-income ratio, or DTI.
In addition, the NACA limits a borrower's mortgage payment to no more than 31 percent of their gross monthly income.
For example, if your monthly pre-tax income is $ 4,000, your monthly mortgage payment would need to be $ 1,240 or less to be eligible for the NACA program.
Savings on payment shock
If your mortgage payment exceeds your current rent, you will need to maintain a "payment shock" saving to make up the difference in payment.
Let's say you pay $ 1,000 a month for rent, but your new mortgage payment is $ 1,300 a month. NACA requires you to save an additional $ 300 each month (for a minimum of 3 to 6 months) before qualifying. You need to keep this money as a savings while you graduate.
Eligible property types
With the NACA purchase program, you can only purchase one owner-occupied primary residence. This includes single-family homes and units in condominiums, cooperatives, and other mixed-use buildings.
You cannot use the program to purchase a second home or investment property. You also cannot use the program if you have other properties.
The only exception is the purchase of an apartment building. You can live in one of the units and rent out the others. Before qualifying, however, NACA requires completion of "recognized" landlord training. You must also hold mortgage payments in reserve for at least two months.
This is how the NACA home purchase program works
The process of obtaining a NACA mortgage is slightly different from other types of home loan. This is what awaits you:
1. Attend a workshop on home ownership
This is the first step in obtaining a NACA mortgage. The workshop not only provides information on home ownership, but also explains how the NACA program works in detail. Workshops take place several times a month in different cities.
To find a repair shop near you, visit naca.com.
2. Meet with a housing counselor
You will also need to meet with a housing counselor. Your advisor will review your income and current debts to determine if you are financially ready to buy a home. If so, they determine how much you can spend on a house.
If you are not financially ready, your advisor will provide NACA qualification instructions and then help you monitor your progress.
3. Attend a buying workshop
Once you are NACA qualified, take a home buying workshop to learn more about the process of buying a home. You will also be assigned a real estate agent to work with to find a home within your budget.
A NACA qualification is only valid for six months. If you don't buy a home within this time frame, you will need to re-qualify.
4. Request a qualification letter
Once you've found a home, contact your housing advisor to request a qualification letter. This letter is proof that you are eligible to buy the home and should be included with your offer to buy.
5. Wait for the home inspection
To buy a home with a NACA mortgage, the property must be in good condition. A NACA-approved home inspector and pest control company will visit the property. Property issues must be addressed prior to closure.
6. Meet with your mortgage advisor
Next, meet with a NACA approved mortgage lender to complete the home loan application process. NACA does not grant loans. Instead, a private lender (typically Bank of America) issues funds.
Your mortgage advisor will confirm that you are still NACA qualified. In addition, they check that your income, employment, debt load, and credit history are all staying positive.
The lender will start processing your loan and then set a closing date.
7. Get post-purchase assistance
You can also use the NACA's Membership Assistance Program (MAP). This is post-purchase assistance that includes additional home ownership, household planning, and hardship support.
Alternatives to the NACA program
Not everyone will qualify for the NACA Best in America Mortgage. If you do not qualify for this mortgage, you may be eligible for other types of homebuyer assistance.
1. Assistance with the deposit
Down payment assistance programs offer grants and low-interest second mortgages to cover a borrower's down payment. Sometimes they can also pay the closing costs.
You do not have to repay a down payment grant. And with a low-interest loan, the company can postpone the repayment until you sell or refinance the home.
Also, some banks are offering grants to homebuyers who made it easier to buy a home during the pandemic.
If your savings account went down during COVID, you may not have enough reserves for a down payment and closure costs – although you can afford a mortgage payment. In this case, a government or bank-operated DPA program could help.
2. Programs for first-time home buyers
Similarly, many programs make home ownership financially easier for first-time buyers. In addition to down payment and closing expense assistance programs, several mortgage programs allow low down payments.
For example, some conventional loans only require 3 percent less, and you can get an FHA loan with as little as 3.5 percent. You may even be eligible for a VA or USDA loan that does not require a down payment.
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3. National Homebuyer Fund
This non-profit organization grants grants of up to 5 percent of the loan amount as well as 0% interest-bearing loans (reduced after three years). These can be used to meet your down payment needs.
The National Home Buyer Fund is available in all 50 states, and you don't have to be a first-time home buyer to qualify.
4. Chenoa Fund
The Chenoa Fund provides down payment assistance to first time buyers with low to middle income. You can use the fund with both a conventional loan and an FHA loan. This program offers different solutions such as a 10 year down payment loan and a second down payment mortgage that is forgivable after 36 months.
Frequently Asked Questions about the NACA Home Purchase Program
Who qualifies for the NACA program?
To qualify for the NACA program, you must have either a low or middle income for your area or purchase a home in a targeted “priority zone”. In addition, you need to buy a house in order to use it as your primary residence; They cannot have any other properties; and you must have sufficient income and / or cash reserves to cover your future mortgage payments. Finally, you will need to take NACA's homeowner training courses and work with a NACA advisor and approved mortgage lender.
What is the income limit for NACA?
The NACA mortgage program has no income limits. However, your income determines where you can buy property. If your income is below the median income for the area, you can buy a home anywhere in the area. If your income is above the median income, you can only shop in “priority areas”. These are low to middle income communities.
What creditworthiness is required for NACA?
The NACA mortgage program has no minimum credit requirements, so you may qualify with poor credit. However, the program will check your payment history. To qualify, you must have made timely debt payments (including rent) for at least 12 consecutive months prior to qualification.
How long does it take to buy a home with NACA?
Once you've signed a sales contract, the NACA says the mortgage process takes 28 days from "contract to closing". However, the entire home buying process takes longer from start to finish. Sometimes it can take around three months for a borrower to become NACA qualified. Once you have it, NACA approval is valid for six months. If you don't buy a home within this time frame, you will need to re-qualify.
Do you need to be a first-time home buyer with NACA?
No, you do not have to be a first-time home buyer to take advantage of the NACA purchase program. Note, however, that at the time of closure, you will not be able to own any other properties. Also, anyone who lives in a property purchased with a NACA mortgage cannot own any other property.
Which banks does NACA work with?
The NACA organization does not grant loans. Rather, it works with private mortgage lenders to provide finance to borrowers. Currently, Bank of America is the NACA's largest partner and the only financial institution it uses to provide loans. NACA has historically partnered with Fleet Bank and CitiMortgage.
Can you sell a home bought with NACA?
Yes, you can sell a home bought with a NACA mortgage. The process is similar to selling another home. Remember, you can get real estate services through the Post-Purchase Assistance Program (MAP). If you have lived in a NACA home for at least three years, you are eligible to purchase another home through the program.
Is there a catch in the NACA program?
The NACA program may seem too good to be true, but it has helped hundreds of thousands of families find affordable housing with no down payments, closing fees, loan hurdles, or mortgage insurance. However, you must meet certain program requirements. This includes completing a free home ownership workshop, working with a housing advisor, covering your financial needs and attending a homebuyer workshop.
What is NACA Mortgage Rates?
Borrowers who apply for a NACA mortgage receive an interest rate that is below current market rates, which increases affordability. Interest rates vary depending on market trends, but include both 30-year and 15-year fixed rates.
What if i don't qualify for the NACA program?
The NACA program can significantly lower the hurdle to buying a home. But not all borrowers will qualify.
Fortunately, there are many other programs out there today that can help reduce the upfront cost of buying a home and bring affordable home ownership within reach.
From low and no down payment mortgages to down payment aids, many buyers can move into a new home with very little equity.
Not sure if you qualify? You can now check your eligibility to buy a home with a lender here.
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