Payment shock still needed?

Home Forums Purchase Program Payment shock still needed?

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  • #63872
    Kristijay
    Participant

    Payment shock determination and calculation can be found on pg 20 of the current workbook. It is simply your DESIRED mortgage payment (not to exceed 31% of your monthly gross salary)- current rent. If your desired monthly payment is equal to your current rent, then your payment shock will be 0, but you will still need to save $200 in your budget to account for unexpected expenses. Payment shock is not a number arbitrarily picked by your MC. They will work with you to determine what is a comfortable, affordable, desired monthly housing payment and your payment shock will be calculated using that number in the above calculation.

    #63873
    Nelsont
    Member

    @Kristijay we have talked about this before. The members on this board don’t necessary want literal definitions they want actual real world decisions. You are right and the workbook is right. BUT Not me nor anybody I know, including a large number of posters on this forum, has ever had an MC work with them to determine a comfortable, desired monthly housing payment. The MC just went straight for 31% or whatever the maximum for that individual was taking DTI into account. In fact, the way it worked at my intake was after my MC took all of my info and wrote up my action plan they printed it out and before handing it to me asked me if I had an idea what I could afford and when I mentioned a number that was close to 31% they put my action plan in front of me and circled the number they already picked out…which was 31%. In a perfect world though you are correct.

    #63874
    Kristijay
    Participant

    The easiest way to determine if your are meeting your payment shock requirement is to add the sum of all your accounts at the beggining of the statement period then subtract the sum of all of your accounts and the end of the statement period. If that number is greater than or equal to you payment shock, then congrats you were successful! Otherwise, you will have to start all over with you payment shock requirement.

    #63875
    NACA_Dreamer2020
    Participant

    Thank you. She keeps calling it Payment Shock, though, which is why I think the language barrier may be an issue. That makes sense. Any thoughts about why the additional $1100 isn’t consider saving for one month? I am trying to figure out what we are to do differently next month.

    This was to a previous response. And not to the directly above response, sorry!

    #63877
    Nelsont
    Member

    The only reason I see for it to not be considered 1 month is if your payment shock is greater than 1100 which evidently it is not.

    #63878
    Kristijay
    Participant

    I’m glad that I could be of help NACA_Dreamer2020. Try to follow my last message to determine the sum of your beggining balances and subtract the sum on your ending balances and see what you get.

    Beggining balances-end balances= x

    Let me know what if you get a number that is greater than or equal to $1100.

    #63879
    NACA_Dreamer2020
    Participant

    I think I may have figured this out, too. Is my MC to look at all of my accounts or just 1? I ask because they only looked at one and kept saying they didn’t see any savings even though even in that statement it was $235 at the end of the statement.

    Forgot to say: The difference was $1335 total from beginning to end.

    #63881
    Nelsont
    Member

    Every account

    It’s not the ending balance. It’s the addition of $200 to the previous balance. So if your ending balance was 235 then the previous month had to be 35 or less. Otherwise it wouldn’t have counted. PLus yes it’s all accounts. So if you saved 1100 in 1 account but lost 1200 combined in 3 others then you are at -100 not +1100

    • This reply was modified 1 year, 3 months ago by Nelsont.
    #63883
    Nelsont
    Member

    So you stared with 235 and ended with 1335? That should work provided your statement shows you already had rent and other bills subtracted.

    #63884
    Kristijay
    Participant

    Yes, add the sum of all accounts and subtract the sum of all accounts. For your desired payment shock of $0 and required budget of $200 you will need to see an increase of at least $200 monthly.

    #63885
    Kristijay
    Participant

    I would suggest you keep a spreadsheet with the sum of your balances for the beggining and end of each statement so that you can track you savings each month. This will also help you to stay on top of your required savings for the next month and give you some supporting documents (in addition to your bank statements) if needed.

    #63924
    NACA_Dreamer2020
    Participant

    Thank you to both of your time, energy, and effort.

    The spreadsheet is a great idea. Maybe adding it all and subtracting prior to our meeting will help us all see and communicate more clearly. That way, if there is something awry, we can look at it and more concretely.
    I think I understand better now. In adding up our primary checking account and then subtracting the expenses, the end balance was $235, but the end balance increase for all accounts was $1228. (A second checking balance stayed the same, a separate savings account stayed the same, but the primary checking end balance was $235, and it was $107 the primary month. So that’s a net of $128 for the month, and then the $1100 increase from the previous month for a primary savings.) But, I do think putting it on a spreadsheet could benefit us all!

    #63927
    Kristijay
    Participant

    You got it! Now that you have your spreadsheet, you can determine exactly what your balances need to be at minimum each statement period to meet that $200 requirement until you close. You should be good to go.

    #63985
    TTrumble
    Member

    Hello all,

    We are always going to advise you to save at least $200 per month even if your Payment Shock is zero. In fact, during the mortgage crisis, whenever we would do the budget for a member seeking a mortgage modification, we automatically built in a $200 per month “buffer”. If I remember correctly, it was actually a HUD requirement.

    The buffer is a smart thing anyway for several reasons:

    -You need to have savings built before you close. Not just your MRF, but an emergency fund or cushion.
    -You are showing your are not going to be stretched so thin by your mortgage payment that you become “house poor”.
    -You always need a little wiggle room in your budget for unforeseen circumstances. I just spent $900 on my car last week for totally unexpected reasons. Thank heavens I had the savings to do it.

    I could go on, but I think you get the point.Show that you can tuck away an extra couple hundred bucks a month and you’ll show that you really have the discipline needed for homeownership.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #63995
    NACA_Dreamer2020
    Participant

    Thanks @TTrumble!

    I do have another question I was thinking on in regards to showing buffer room. I think I have seen elsewhere that you recommend writing an LOE for this, but I want to make sure this is correct.

    I am paid bi-weekly, so there are times I am paid right on the day of my statement closing date. Other months, I am paid after. (E.g. my statement closes on the 13th. I am paid on the 3rd, 17th, and 31 this month. Next month, I am paid on the 7th and 21st). Because of payday fluctuations and bill day due dates not fluctuating, end statement balances fluctuate. In other words, not because we are spending any more in the month but because some bills may have been removed while others still not. Does that make sense? I guess what I am saying is my end balance statement cannot accurately reflect our spending/saving for the month because of the payday fluctuation. Am I to write an LOE saying basically this?

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