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).
There are other aspects to NACA that just the mortgage plan they offer. I’ve had a NACA loan for 2 years and the premise behind it is that if you live in the home that you own then the neighborhoods are better off. This, for the most part is true, and you have to abide by that principle in order to keep your deal. As for mortgaging additional rental properties, well, I’m not so sure if that really is forbidden or much less enforced. In these times all I think that the banks really want is for you to pay your mortgage. I only own one property located in Buffalo, NY though so attempt at your own risk. NACA is basically a broker for Citimortgage, who holds my mortgage.
I was skeptical in NACA at first and almost didn’t get into it, but my wife dragged me in by the ear. NACA wants to prepare you for the whole mortgage process mess and help you from getting ripped off. They’re the anti-subprime neighborhood watch guys. They want you to consider all aspects of the process and place you in a house that you can actually afford. They will look at your credit report not for your scores but for your debt. You will get a budget analysis and breakdown and given a loan range (or you will be rejected if you really can’t afford what you want). They prefer you actually do all this before you pick a house as it takes a while, plus at least one of you (Husband or Wife or both) will have to attend a buyer’s workshop. This is all legit. If you get a loan through them they may ask you to come to a meeting, or a protest as they do these things. None of this is compulsory but there are real purposes behind them, it’s not a bunch of people singing Kumbaya.
I attended one meeting and zero protests. This isn’t because I didn’t want to but is because I have screaming kids, constant overtime and I’m always working on the house I bought. The meeting I did attend was for the purpose of mortgage assistance to NACA members who are facing hardships. In other words, you just got canned and can’t pay your mortgage this month, or maybe next month too. This is where the Neighborhood Stabilization Fund comes in. NACA will temporarily pay your mortgage until you get back on your feet or head to bankruptcy court. This is one of the reasons you pay into it. But it goes to a vote by a panel of members which is presided over by a NACA agent. We gave two people money to pay their mortgage. One lost their job and the other was headed to bankruptcy due to reduced hours and ridiculous credit card rates. They want to help you stay in your home if things get tough. If you want to go to protests then Google “NACA protests” to see what they’re all about. Like I said, participation is not compulsory. NACA is also very professional and organized, at least in my experience. They make use of information technology better than most, and I’m an IT Nerd so I know what I’m talking about.
Another important aspect of the program that people don’t know about is the fact that you can get concessions from sellers (as you would in a standard mortgage). If you don’t know what a concession is then Google “mortgage concession” or “seller concession”. You can also have repairs done on the home you wish to purchase and have them rolled into the mortgaged amount. When you finally pick a house and have it inspected, you will probably find some problems if you’re trying to get a good deal. There are certain problems (roof, plumbing, electrical) that have to be accounted for before the house can be sold to you. NACA could care less about cosmetic problems, but say the house needs a roof and some gutters. The inspector will write it up and then you can get an estimate from the contractor on a price to fix it. The contractor must be registered with NACA, they have a long list of contractors in their network. If you have somebody specific in mind that is not registered with NACA then you can ask them to register on their website and get into the network before they can submit their estimate. Some contractors don’t want to do this as they don’t want to be bothered with the paperwork. It’s their loss. If you have multiple problems with the house you can either get multiple individual estimates or go through a general contractor that’s registered. I had several repairs done and the only issue I had was that it took them a couple months to pay these guys. This was during the final days of the mortgage boom though and they were cracking down and speeding up the process at that time so it’s probably faster now. I had $10,000.00 worth of repairs done on the house and now it is valued at $25,000.00 more that my mortgage. This is present day, after the housing bust.
The final aspect worth noting is that you can drastically reduce your interest rate with money down. When I closed on my property I took a seller’s concession for $5000.00 from the previous owner and used it to buy my interest rate down a point to 4.25% from 5.25%. If I had $25,000.00 to put down I could have bought it down to zero percent. This is a fact. Is this still possible now? I’m not sure but it probably is. Think about that for a minute. I could sell my current house and buy another one using NACA and use the profit to buy my interest rate to zero. I could also have major repairs done that would be included in the mortgaged amount. That would be nice right? Well, it was true when I closed on my house so it probably is still true today.
The NACA process can be a pain sometimes but it is definitely worth it in the end.
Does anyone know of a good agent in MD?
I would like more infromtion on your program and how can I apply.
For more information on NACA go to www.Naca.com
Hi! I was wondering if all of my charge offs would have to be paid in order to go through NACA. My husband's credit is good; however, my credit isn't. I'm afraid to start the process and end up with my credit being the hold up on us obtaining a home.