How much of the Minimum Required Funds will actually be used?

Home Forums Purchase Program How much of the Minimum Required Funds will actually be used?

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  • #38581

    We are undergoing the NACA homebuying process. How much of the MRF will actually be used toward something, or will it all end up being savings? If some of it does have to be used, which parts and when? For example, I know part is for escrowed real estate taxes. Will we actually pay this money to the state in advance? We know that we need to keep the balance throughout qualification, closing, etc. Thanks in advance for your help and we’re looking forward to this journey!!

    #38582

    The dollar amount differs. For me, I had to use my MRF for the inspection, re-inspection, and earnest money. I know in the handbook it states it will be used for inspection and earnest money. It is also used for the “closing costs” or money you bring to closing for property taxes and insurance. Some people have actually gotten money back at the closing table which made the rest of the money after inspection, etc savings. Just be prepared to pay the inspeciton, earnest money, and whatever dollar amount they tell you out of the MRF. I only had to bring about $260.00 to closing after the inspection so the rest was virtually savings. Its a great program.

    #38583

    Thank you so much! So, I guess the amount paid for taxes and insurance will depend on the state and/or the seller’s requirements? Sorry if I’m not making any sense. We’re new to this! Thanks.

    #38608
    TTrumble
    Member

    Hello roadtohomeownership123,

    Think of it this way: Your counselor will determine your MRF based on what he or she thinks you will actually need. Therefore, the only safe conclusion is that you will use all of it with the exception of the one or two months of reserve mortgage payments that are part of the MRF calculation. That’s why we require you have the full MRF saved before your file is reviewed for credit access.

    As far as when the money is actually used, there will be several points.
    Earnest money will be needed when you enter into the Purchase and Sale Agreement. Obviously, the inspector will want to be paid ASAP. Initial insurance will vary from state to state, but assume that you’ll need to pay it as soon as the policy gets underwritten. Taxes and other prepaids are usually all taken care of at closing. You’ll usually provide a check to the title company/closing attorney and they’ll take care of it from there.

    Hope that clarifies things.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    • This reply was modified 3 years ago by TTrumble.
    • This reply was modified 2 years, 10 months ago by TTrumble.
    #38614

    Hello, Tim. That helps a ton! Thank you so much!

    #39405
    Queenbhrh917
    Member

    Tim,

    My MC just told me that all of our MRF must be in the bank before it’s submitted to the bank. How will we give Earnest money deposit and pay for inspection if all funds have to be in the bank? This makes me think we need additional funds to pay for those as well. Please advise.

    #39419
    TTrumble
    Member

    Hello Queenbhrh917,

    Either your MC did not go into enough detail or you took what he or she said a bit too literally. Of course the earnest money and inspection fees will have been spent at that point, and you should easily be able to account for that through your bank statements.

    By the way, the funds have to be there before your file is sent back to underwriting for credit access review, which is the step immediately prior to sending the app to the bank.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #45413
    bayarea415
    Member

    @Queenbhrh917 @TTrumble Hopefully, I am understanding this correctly. Say your MRF was $4,500.

    I got my offer accepted on a home and the earnest deposit was about $2,000 as well as Home Inspection thats $500.

    This leaves me with $2,000 left from my MRF.

    In the workbook it states that we need to maintain our MRF until closing which is where it gets me confused.

    Does that mean i should have more than the $4,500 so i still have that same amount until closing even though the other items have been taken care of like earnest deposit, Inspections, etc?

    Or does that mean i just take $2,000 to closing because i used the rest on other items.

    Thank you in advance.

    #45546
    JHarris981
    Member

    @bayarea415 I would assume that only the $2000 is needed at closing since all other items have been taken care of. I would write an LOE each time I used MRF and submit that to my MC/CC so that there is a paper trail as to why my MRF is decreasing. I hope @ttrumble can chime in.

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