Home After Home

The lending industry is constantly changing. This year new changes are coming to the FHA loan. The good news is that FHA is keeping the low down payment of 3.5%.  Here are a few of the upcoming changes:

•  Upfront mortgage insurance premium is increasing to 2.25%. Previously it was 1.75%.  FHA will continue to allow buyers the option of paying the premium upfront or financing it into the loan.
• Borrowers with a credit score below 580 will need a 10% down payment. All other borrowers will be able to stick with the 3.5% minimum down payment.
• FHA is looking to increase the annual premium which is currently capped at .55%.  By increasing this number, the upfront MIP may be reduced.  (Note to the consumer: The annual premium affects the MIP that is added to your monthly payment.)
• Maximum seller concessions will be limited to 3%. (Previously sellers could contribute up to 6% towards the buyers settlement fees.)

When will the changes go into effect? The upfront MIP increase will be implemented in Spring of 2010. FICO Score and down payment requirements will be implemented in the Summer of 2010.  The seller concessions change will start in the Summer of 2010.

Well, I wrote a post earlier about this great loan program for anyone making a purchase under $200,000.  Today, I'm writing to say that maybe it's not for "anyone".  It is a loan program that has it's merits, but if you are a buyer who is qualified to do an FHA loan, NACA may not be the best route for you.

I was considering using NACA to purchase a new home for myself. I sent a friend of mine (with whom I'll be purchasing) to the NACA workshop.  What I found out was a little disturbing.  First of all, if you are responsible with your money, I doubt you will want to sit with one of their "mortgage consultants" who will go through your budget with you and coach you on fine tuning that budget.  Secondly, I heard that they got into about FHA.  At the workshop they talked about FHA being "loan sharks" and talking badly about the FHA program.

By what logic can anyone call FHA a loan shark? I mean it's a government backed program that offers a minimal down payment and lower mortgage insurance than a conventional loan.  Plus FHA is more forgiving on credit scores than conventional financing.  Sure, if you compare it to a $0 down, $0 closing cost loan, the no money down loan may be more appealing.

But let's all keep in mind that even if you have no money up front when you purchase the home, you're still paying for it in the long run - every penny of it.

There are those critics out there who diss the NACA program as well.  They complain that if people have no money to put down then they shouldn't buy a home.  And, while there may be some truth to this statement, it is my belief that everyone deserves a chance.  And that's why I still think NACA is a good program.  Because at it's heart, it is there to help people who really wouldn't have had any other method by which to purchase a home.  That's a good goal.  The credit counseling is a good part of this program, because the typical buyer who can't qualify for FHA probably needs the credit counseling.

So, if you are a buyer with poor credit, no downpayment, and you're willing to put some effort into making the dream of home ownership a reality - the NACA is the program for you.  Agents: if you have a buyer who is qualified for an FHA loan already, they probably do not need NACA, and they may not want to spend the time to go through the program as it's a longer process than normal.

Summary: NACA is a good program for people who need it.  And, quite frankly, I don't think NACA wants the people who have other loan options to come through their program.

In my post yesterday I mentioned that the interest rate on the NACA loan was 4.875%.  It did go up and is now 5%.  It's still a very interesting program that makes slightly lower than normal interest rates available.  I don't know how often the rate fluctuates, but it is a 30 year fixed rate loan.  If you would like more information, just call and we'll provide you with current updates via phone or in person.  225-341-BRLA

To view the blog post to which I am referring go so www.HomeAfterHomeBlog.com and scroll down to the post entitled:

NACA: Best Kept Secret? 0 Down 0 Closing Costs 4.875% Fixed Rate Loans

I first heard about NACA last week. Over the weekend I spent much time reading on their website about the NACA program.  And, today I went to an agent workshop wondering, "What the heck is the catch?"

The program on it's face offers a home loan on purchases up to $200,000 with no money down and no closing costs at a below normal fixed rate.  They particularly care about credit scores, so it neither helps you to have a good score nor hurts you to have a bad score.  There's no prepayment penalty and no private mortgage insurance.  So just what IS the catch?

Well, there are a few things that one should know before using a NACA loan to purchase a home.  First, you must live in the house for the entire time that you have a NACA loan on the property.  Next, you won't ever be able to get a second mortgage (such as a Home Equity Line of Credit) as long as NACA has the loan on the house, because they won't permit a second lein holder.  (If you wanted to convert the property into an investment property, you would need to refinance into a conventional loan out of the NACA loan.)

Oh, and remember I said there's no mortgage insurance? There is, however, a $50 per month fee that you pay.  I think they could have come up with a better acronym for this fee which is NSF. It stands for Neighborhood Stabilization Fund.  At the workshop they said that the homeowner pays this $50 fee for 5 or 7 years. I'd like to know exactly if it's 5 or if it's 7 years and how they determine when they remove the $50 charge.  You also need to get a lot of documentation to them, but the purchase workshop appears to be designed to prepare you for the paperwork that you need to get together.  And, you do need some money. While there are no closing costs you do have to have your prepaid items (insurance and taxes) and you'll need to pay for an inspection.

To summarize, I haven't found a "catch".  It looks like a good program for anyone who is making a purchase up to $200,000.  So, I'm going to try them out and see how it goes.  Will keep you all posted. If you have had any experience with NACA -- positive or negative -- I'd love it if you would leave comments on my blog.

If you or anyone you know is looking to make a purchase up to $200,000 in the Baton Rouge area, let me know and I'll put you in touch with the right people to start moving toward your 4.875% loan with no money down.  This looks like a good spot to advertise my new Google Voice number which is 225-341-BRLA (2752).