June 28, 2020 at 2:53 pm #69805
I am a bit confused about the payment shock and how my over all savings pattern is calculated. I have 3 bank accounts. I have allotments going into each one. One account I use to save my payment shock, which I have been for about 4 months. The second I get a direct deposit via allotment from work that I solely pay my rent via cashier’s check and my tuition line of credit. And the third is where the rest of my bills are deducted from. The money left over I use as my “spending money” for groceries, gas, and anything else. So the later 2 wouldn’t have anything saved because I have a designated account to save my payment shock.
My issue is when I had my appointment with my MC, they said I wasn’t saving enough per month and that NACA looks at savings over all open accounts. But I have 1 account solely used for savings, so how does that make sense and what formula is being used? I got pushed back 3 more months. I need help!! I don’t understand what the issue is and you can see in my one account that I have been saving my payment shock EVERY month!!
Can anyone help??? @ttrumble any help?June 28, 2020 at 3:20 pm #69806
One way to look at it is payment shock is based on total net worth. If it is easier for you to separate out a savings account that’s fine but keep in mind the way it works is the statement balance for all accounts is added up. The next month the 3 bank accounts combined needs to be more than the last month by your payment shock amount.
As an example let’s say you have a payment shock of 200. You have a total of 1000 in 3 accounts combined. Next month the total in 3 accounts combined needs to be 1200. The following month it needs to be 1400.
Now let’s say you saved 400 the first month. This means you have 1400 combined. Payment shock is not a goal it’s an absolute minimum that resets every month and never stops until you close on your house. This means after 2 months of a 200 payment shock and 400 saved the first month you must have 1600 total across all three accounts instead of 1400. Make sense?
The reason is because payment shock represents a trial mortgage payment. If you have a 200 payment shock you will be qualified for a mortgage payment that is 200 more than your rent. You need to demonstrate every month you can pay your rent plus all your bills plus an extra 200 without going negative. And the reason for that is banks don’t accept short payments. If you double pay this month and you are ten dollars short next month the foreclosure process starts.
So in a practical example you have 2 accounts with 500 each in June and a 3rd account for payment shock. If in July you have 500, 500 and 200 and August you have 500, 500 and 400 and so on that’s a good start.
If in July you have 500, 500 and 400 then August you need 500, 500 and 600.
If in July you have 400, 500 and 200 that doesn’t count. Even though you are setting 200 aside you are actually spending more than you are making.
Hopefully this all makes sense.
Now if you follow the advice of @@ttrumble there is absolutely no reason for anyone without a business to have more than 2 accounts and whether it makes it easier on you or not if you have more than one checking and one savings that are tied together you will likely run into questions and confusion along the way.June 28, 2020 at 3:42 pm #69807
@nelsont Thank you so much for this explanation. So in my case, I have been saving my payment shock consecutively for 4 months in my one account, same amount every month. So that is good to go. So that dollar amount has been growing each month by the payment shock. Since this is clearly being saved, why am I being penalized for not saving anything in my other accounts? You get what I’m saying? As an example (I’ll use random numbers for ease) here are balances each month:
April: $800 (Account #1 – payment shock), $10 (Account #2), $10 ($Account #3) = $860
May: $800 (Account #1 – payment shock), $10 (Account #2), $5 ($Account #3) = $815 + $860 = $1675
June: $800 (Account #1 – payment shock), $10 (Account #2), $10 ($Account #3) = $820 + $1675 = $2495
So, as you can see my payment shock is being saved and my balance is growing every month even with adding all account balances each month. You see what I’m saying now?June 28, 2020 at 4:05 pm #69808
Unless I am missing something I would be willing to bet in your example your MC is looking at account #2 going to 5 in May which gives you a negative 5 balance difference from April to may. That would start you over.
Your balance can’t just grow. It needs to grow by a minimum value. You said 860 in April but the math is actually 820. In this example 820 is the minimum. You only hit 815 in May which would start you over.
Your other accounts can be less from statement to statement IF you make it up in another account that same month.
So payment shock +5
805 5 15
June 28, 2020 at 4:13 pm #69810
- This reply was modified 8 months ago by Nelsont.
Ohhhh ok, so I think I get what you are trying to explain. Even though I was given a payment shock of say $800 in general and I have been saving that in one account each month, they are looking at “growth” in the other 2 accounts as well?
So in the other 2 accounts, my ending balance has to grow as well? So the ending balance in the other 2 accounts have varied, like the example. One month I will have like $20 left, and the next month I may have $5 left over in that same account.June 28, 2020 at 4:21 pm #69811
Forget you have a separate account for payment shock for a moment.
Add up the ending balance of every account for April. Including your payment shock account. What is the total?
Now add up the ending balance of every account for may. Including your payment shock account. What is the the total? If it’s 800 more than April you’re good. If it’s 799 more than April you start over.
Your other accounts can vary as long as your total increases by your payment shock.June 28, 2020 at 4:31 pm #69812
Yes, @nelsont! You got me, we are on the same page. My account grows by $800 each month, minimum.
May: $800 (+$800 from April balance is $1600)
June: $800 (+ $1600 balance from April and May = $2400)
Total ending June balance = $2400
So with this, my MC said because my other accounts didn’t grow, that is what set me back according to the system. She said she plugs in the numbers and the system tell her what has been saved each month. Does that sound right? Keep in mind I have had NO negative balances at all.June 28, 2020 at 4:46 pm #69813
Not sure it sounds right to me. I would politely ask your MC to break out the math and explain why their math is different than yours. It sounds to me like the number of accounts you have is confusing your MC which is why it’s not recommended to have a separate account for payment shock and why it’s not recommended to have more than one checking and one savings account.
Once you get this straightened out remember the details of how it was resolved because it could pop up again from the underwriters when you are submitted for qualification and again during credit access and finally again during bank of America’s review.June 28, 2020 at 6:02 pm #69821nitromilesParticipant
I think what might be happening is, although your payment shock account clearly shows you are saving the $800, one of your other accounts dipped. In that scenario, it can be looked at as if you “borrowed” or moved money from one account to your payment shock account if that makes sense. Perhaps the best thing would be to make sure your payment shock account continues to grow by $800, while the other two grow by like $5 each month so it doesn’t look like you’re borrowing from one account to fund the other. I could be completely wrong though as I haven’t even had my intake session yet…July 2, 2020 at 7:26 pm #70025
@nitromiles Yea I’m just confused. My MC said we will go through my statements at my next meeting, but in the meantime I have to wait 3 more months. I was so deflated about that because I was actually saving over my payment shock in my account designated for that.July 3, 2020 at 8:01 am #70035TacoParticipant
@bluebutterfly i completely get where you are confused. I had three separarate accounts at 3 diffferent banks (one for shock, one for bills, and one anything else) and my MC said the same. Although the payment shock acct showed ongoing and consistent growth, the other two accounts showed little growth or stayed about the same each month. To me i had “extra“ in those accounts and used it for whatever. I mostly used the “extra” to pay down my debt. In addition, I had to put a halt my discretionary buying to make sure the other two accounts grew. My MC even went to bat for me and pointed out to the underwriter just how much I also contributed to my 401k and Roth IRA for years in support of showing that I do “save” money.
I had the same headache because to me, the fact that the payment shock account kept growing showed I was saving enough. To this day, I don’t completely get it. However, those were the things I did to overcome the issue. Your situation may be different, but I wish you all the best.
🌮Taco🌮July 3, 2020 at 9:13 am #70037
@taco Yes, yes, yes!!! So you get what I am going through. So for your other 2 accounts, what was acceptable to them to show growth and savings each month?July 3, 2020 at 9:17 pm #70052applepieParticipant
Im new and trying to help my mom figure this out as well. Would it be easier to start over every month regarding your budget/income?
Normal monthly budget= 2400
Net income=2700 (i know most get paid biweekly)
Now let’s say in July you end up with $50 extra at the end of the month. You would slide that amount over to your Payment Shock account or you can keep it in your main account but DONT USE IT. Then come August just start over again with your net income, budget, and Payment Shock for that month.
Feel free to correct me if I’m wrong.July 3, 2020 at 9:36 pm #70054
@applepie I see what you are saying. So the way it has been explained to me was even though I have been saving my payment shock in my one designated account and that account has been growing, they still look at growth across all open accounts. So although I am clearly saving my payment shock, it somehow is affecting the way they calculate my savings from their end. @ttrumble and @nelsont may can explain better so I won’t mislead you. I’m still in the beginning process.
I think as long as they can see your payment shock every month growing by the required amount and savings growing you are on the right track. I believe the key is they are totaling it from all of your open accounts. So your $50 in the other account being saved would be accounted for to total $300 when added to the $250 in your other account. Don’t feel bad though, this whole thing took me for a spin and deflated me for a few days, but I’m back.July 3, 2020 at 9:41 pm #70055
Payment shock is the difference between your current rent and your maximum approved mortgage. Income doesn’t factor into the equation.
My advice is don’t create a separate payment shock account. Just remember payment shock cannot be averaged. So if your payment shock is 300 and you save 350 you still need to save 300 the next month.
As you can see above if any one of your accounts doesn’t grow even if you saved your payment shock you can run into issues. That’s why it’s easier to simplify and streamline your accounts. Is the total growing? That’s the question.
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