Help Understanding….

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  • #66412
    Nesh1120
    Participant

    I am new and unfamiliar with the correct terms to do an effective search of previous posts. Please bear with me…..

    I am currently a homeowner who will be selling and my fiancé and I plan to purchase with NACA. He rents as we do not currently live together. With regard to payment shock, does it only apply to the difference in rent and mortgage? Or current mortgage and new mortgage? How is it determined when there’s co-buyers with two different residences? The total of my current mortgage payment and his rent exceeds our intended new mortgage payment by far.

    #66414

    If you will both own the house, you both count your total housing payment together – ie your mortgage and his rent. If this exceeds your qualification amount, you’ll likely be asked to still save $200/month on top of that. Depending on the outcome of your home sale, you may end up with far more cash to close than you need – but it doesn’t count until it’s in the bank, and it doesn’t count toward payment shock.

    #66417
    Nesh1120
    Participant

    So does your existing savings count toward it? It’s pretty sizable and saving an additional $200 monthly won’t make much difference IMO, but I understand if it’s a requirement.

    #66418
    Nelsont
    Member

    Existing savings counts toward minimum required funds. Payment shock is showing proof you can save on top of your mortgage/rent and all other bills. It cannot be averaged. It must be the sum total of all your bank accounts combined – setting aside money every month doesn’t count if one of your accounts isn’t at least staying flat. You can think of payment shock as total assets or net worth. Your total assets or net worth must increase every month. If you can show this in your bank statements where every statement ending amount is at least $200 more than the ending amount from last month over a period of 3 to 6 months then you have already met the criteria.

    #66728
    BlessedMom88
    Participant

    Does our payment shock have to be shown 3 months prior to qualification or its a continuous saving method through completion?

    #66732
    Nelsont
    Member

    Both. You will not be qualified until you can show the most recent 3 consecutive months of payment shock. You will ALSO be required to maintain the payment shock until the day you close or risk losing your qualification status or even be denied the loan.

    So if you did show payment shock in February but did in March then you will need to show payment shock in again in April AND May before you can qualify and then also in June AND July AND August AND September and so on until you get the keys to your house.

    Likewise if you showed payment shock for January AND February AND March you could potentially be qualified now and then continue on through every month until you close.

    The underlying theme with naca is habits. You cannot move forward without first demonstrating a history of good habits and you must maintain the good habits in order to keep on track.

    #66734
    BlessedMom88
    Participant

    Ok I’m at the very beginning of the process so I’m just completing a full month of payment shock! My counselor mentioned finishing up my documents and then seeing about my preapproval so I was just wondering and because I wasn’t sure! Action plan items have been revised and completed outside of the payment shock so I just wanted to have an idea of my next step! Thanks!

    #66804
    TTrumble
    Member

    Hello Nash1120,

    Based strictly on what you have written here, you should actually be in great shape.
    We do look at your total housing payment each month when creating your budget and determining affordability. Therefore, both your mortgage and his rent will be used.

    You are correct that Payment shock is defined as the difference between your present housing payment (typically rent) and your desired mortgage payment. Since the total of the rent and existing mortgage payment exceeds your desired mortgage payment, you will not have any Payment Shock, but you will be asked to save $200 per month as BakerTheBaker noted.

    Even if you already have substantial savings for Payment Shock and interest rate buy down, we ask you to demonstrate the monthly savings for a very practical reason. Even if you presently have significant savings, when the time comes that those savings are used for MRF, buydown, new furniture after closing or even a vacation later on, we need to be able to see that you can still build an emergency fund to help with any unexpected repairs or to help make the mortgage payment in a time of job loss or reduced income such as literally millions of Americans are experiencing right now.

    In short, just keep tucking away at least $200 a month and you’ll be fine.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #66805
    Nesh1120
    Participant

    Thank so much for your replies @BakerTheBaker @Nelsont and @TTrumble

    I am looking forward to the experience and I’m sure I’ll be back with more questions along the way 😉

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