Tagged: under contract
August 27, 2019 at 11:58 am #58715frankysmomMember
My MC let me know that grants cannot be used as MRF, has that always been the case? But instead towards down payment.August 27, 2019 at 12:19 pm #58717
Yes this has always been the case.
One of the requirements for buying any home not just through NACA is that you can afford it. NACA requires that you show, among other things, the ability to save and the necessary funds to not only buy a house but take care of emergencies without missing mortgage payments.
The MRF includes 2-3 months PITI as a cushion. You do not pay this at closing. This is kept in your savings account. They (and every other financial institution) wants you to have at least 2 to 3 months of payments that you don’t touch just in case something happens…the financial experts’ suggest amount is at least 6 months…Your MRF must be satisfied in order to buy a house through NACA.
Now, once you put an offer in you can get a grant if there are any in your area for which you are eligble and that money can be applied toward the interest rate buy-down. The reason you can’t pocket the money and think you will use the grant to help out with or replace mrf things like paying your taxes and insurance escrow at closing is because (I believe) you never actually see the money. You may be awarded the grant via email or hard copy as a letter but the money goes directly to Bank of America (or the title company) made out to them on your behalf by the granting agency. The MRF funds must come from your bank account via either a check with your name on it or a wire transfer.
Make sense?August 27, 2019 at 12:26 pm #58718Peapod0609Member
Well I think that might be more due to the nature of the grants. A lot of grants are not compatible with NACA, and for it to be NACA compatible I believe it does have to specify that the grants are to be used for interest buy down or principle reduction. A lot of grants offer closing cost assistance, but because NACA has no closing costs, any grants that go towards closing costs typically will not work with NACA.
Typically grants for purchasing a home are either closing cost assistance, or down payment/interest buy down assistance. They usually don’t give you money just to sit around in an account so to speak, it’s usually for one of those purposes specifically.
Having said that, interest buy down is part of your MRF funds so technically if you’re a little bit short of your MRF (and part of your MRF is going to be funds for interest buy down) then I guess in a roundabout way a grant could help you with MRF funds if interest buy down is part of the equation.August 27, 2019 at 3:18 pm #58721frankysmomMember
Grant money does indeed count toward your MRF just as any other gift would do. It does not however count toward and Payment Shock Savings you may required to save.
The above was from Tim in 2018 saying otherwise which is why I asked. I understand that it doesn’t count towards shock. Thanks
August 27, 2019 at 3:33 pm #58723
- This reply was modified 1 year, 4 months ago by frankysmom.
You really need to double check that with your MC and the grant you apply for. Many grantors will not give you the money directly and you typically will have to show MRF liquid in your checking account prior to credit access approval.
Even if you are using 401k, other savings or a gift from family they will not take “IOU’s”. The transaction must occur before your credit access approval. You will likely not be able to sign your bank app until then which will cause delays in closing.
As another note. The landscape has changed a lot in the last year, most notably with Citi no longer issuing mortgage loans and BOA having different guidelines fees and requirements than Citi. I would question any de facto post prior to 2019.August 28, 2019 at 9:17 am #58743evestalphdMember
Has anyone been able to successfully work w/NACA if you were already under contract?
The website reads, “Starting with NACA qualification after committing to a property by signing a contract is not recommended. There may not be enough time to qualify with NACA, and even if the Member does go through the process in time, the property may not be within the qualified monthly payment. To complete the qualification process therefore may necessitate a delay of closing or even termination of the purchase contract. Every Member that goes through NACA’s program will need time to be counseled and prepared for homeownership with an affordable payment over the long-term.”
It says it is not recommended, but not that it is not possible.August 28, 2019 at 9:39 am #58747
It is possible. Definitely not recommended.
The reason is time. Under normal circumstances you can plan 6 months from workshop to close if you are “ready now” and have a house picked out. You must attend a workshop in order to get an intake appointment. The intake appointments are first come first served with no exception so there may be 1 to 2 months or more between the workshop and intake. You need to volunteer twice before closing with at least one of those times before qualification. If your seller is ok with holding the sale pending until next year, possibly into the spring then go for NACA qualification.
You will also have to take into account NACA’s qualification amount is lower than other avenues. NACA will only allow an approval of 31% of gross income as long as total DTI is 40% or less. FHA and other conventional loans will allow 35-36% with 43% max DTI. This lower approval doesn’t make much of a difference due to the interest rate buy down but, if you were already approved for a loan at 35% gross income and say 41% DTI you will not be qualified to buy that house through NACA.
Hopefully this helps you out with your decision making.
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