MRF/action plan discrepancy

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  • #58705
    frankysmom
    Member

    Hello

    I just noticed a discrepancy in my file. My initial MC has my MRF listed as 17K at the top line of my file but as 23K in the action plan lists.

    The system calculated the 17K figure but she said the higher figure would be more realistic.

    We have a meeting this week with a new counselor. What number should I go by?

    (Waiting on baited breath for a response since the smaller number would equal qualification)

    Thanks!

    #58706
    Nelsont
    Member

    This is based solely on your finances so only you can know the answer. Do the math. What does the 17k include? What does the 23k include? You should have it itemized. And it should all be estimates until you put an offer on a house. Your mrf will change based on the house you put an offer on.

    You will need between 6 and 10 months property taxes so that’s the most likely place to see a difference. You may start out with 17 but that could be the absolute bare minimum depending on whether they want 6 or 10 months. They will almost assuredly want 10 months unless your credit and finances are impeccable.

    It can go up if home owner’s insurance and hoa fees are high or if your salary increases which would increase your piti.

    One thing to keep in mind is your mrf does not take interest rate buy down into account. If you buy down the interest rate you will not be allowed to use your entire savings so plan to add 2-3 months piti to your mrf.

    #58712
    SnillocS
    Member

    @nelsont just out of curiousity what exactly is the MRF based on when it comes to estimating what you need to have saved? You mention impeccable credit (mine is pretty good, btw) but why is credit even a factor? This is the first time where I’ve seen 6-10 of property taxes should be saved, the most I’ve seen on this forum is 1-3 months. My estimated property taxes are around $5,000 a year, so I should be expected to have up to $4K saved for the tax portion of my MRF? My intake meeting is in December and I’m SO confused at this point. I’m trying to be proactive by being prepared but not understanding why the huge range of 1-10 months for taxes and ins. for MRF? I’m buying a new construction home, cost $366K.

    #58713
    Nelsont
    Member

    OK so credit score is not taken into account but credit history is. Hopefully you understand the difference. You can have a 580 credit score which is not too good and still get qualified. If you have foreclosures, repossessions and/collections on your credit report and they are 12-24 months old but you have settled those debts or are in a repayment plan with no missed/late payments on those or any other bills then you will be fine. NACA judges your character and with those negative remarks on your credit report a bank will likely deny you a loan but NACA will see that you have taken the steps to better yourself financially and have maintained the good financial habits.

    The MRF is explained in your workbook. It is based on several factors including your income and area you want to buy in. Your maximum PITI will be used to determine your MRF. You will need 2-3 months of PITI (this is not money paid at closing but rather a cushion built into your savings to allow for a rainy day fund). Your home owner’s insurance is also part of your MRF. You will need of that 5k at least 3K of property taxes. The reason is that your home owner’s insurance and property taxes are paid at closing and go into an escrow account. Since property taxes are paid by the lender usually in 2 payments, once every 6 months, there is a chance your taxes go up and your more than 6 months in escrow will account for this. There is also a chance your seller’s lender has already paid taxes for the year in which case you could be eligible for a refund from the IRS but not until after you settle.

    Your MRF does not take interest rate buy down into consideration. Your MRF as stated earlier has a 2-3 month cushion built into it. If you buy down the interest rate you will need to add an extra 2-3 months because you will not be allowed to use all of your savings.

    Does this help you out at all?

    #58716
    SnillocS
    Member

    @nelsont. Thanks for your very thorough response. In fact what you’ve detailed is basically how I understood the credit and MRF expectations however your previous response kinda combined everything into one and I got confused. It sounded like you were saying your credit would be used to determine your MRF and I just wanted to gain a better understanding of that if that was indeed the case.

    I have been in the program for over a year because I wanted to make sure that I had ALL of my ducks in a row before I come to the qualifying table. It’s amazing how much you can learn from this forum. I’ve read the qualification handbook a gazillion times and have still learned more from this forum than any other resource so again, thank you.

    #58734
    frankysmom
    Member

    Thank you, Nelson, that was quite helpful. You’ve been a Godsend!

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