January 12, 2018 at 3:37 am #39911
Thank you in advance for reading all of my questions. Now that the time is here and I am close to choosing a home, doubts are flooding my mind. Can you please help with the below questions:
(a) It is in a money market, is this okay? If the money has to be in there at the time of closing how does Naca get their money? I don’t withdraw or bring a check or anything right?
(b) The MRF includes money for inspections. The handbook says the MRF must be untouched at time of closing. That’s impossible if I need to take inspection $ out. Is this accounted for at closing? For instance, my MRF might be 5,000, but I took out $500 for inspection, so at closing, there is $4,500. That’s okay, right?
I thought I was going to contribute 1% to buydown, but I might need 2%. I don’t have the money in liquid accounts for the additional 1%, but I do have it in 401k.
(a) Can I take out a loan against my 401k and pay myself back? Naca says to not take out any credit, this would not be considered credit right?
(b) If I do this, this would be increasing my monthly liabilities will Naca count this against me?
(c) Do I have to let Naca know beforehand what I am doing? Or can I just take the disbursements and put into my account?
(d) Also, this has to be in my account prior to the bank app right?
Funds in more than one account
All of my MRF will come from my money market account, but my buydown will come from the money market account and my savings account. Is it okay that my buydown is not all in one account?
Using shock payment funds as a source to buydown
The handbook says somewhere that at closing the shock payment funds should show in your account. my savings account already had a little bit of money in there, but it’s pretty plump because of the shock payments over the last 6 months. Since it has to be in there at closing could I use these funds as a source to pay my buydown. I’m making up a number, but let’s say my saving account has $2k in it of which all of that $2k is recorded to have been from shock payments. Now that it’s closing time, can I use that money to go toward buydown or MRF at the closing table? I would think that would be okay, but not sure.
My payment max is 1417, however, I’m coming in at 1422. I would have to come up with $2500 to buy a quarter of a point to get the payment below $1417. Can naca waive the $5 dollars or will they make me pay the point, or do they have to requalify me to get me up to $1422? I know the last option would probably be like starting over right?January 13, 2018 at 6:16 pm #39926
You have alot of specific questions that I don’t know about, but I can tell you that the worries and doubts that you have will work themselves out as you go through the process.
Your MC will always be the best source for getting specific questions answered. Try not to drive yourself too crazy.
A few things that I am sure about or pretty sure about is:
your payment shock savings is what funds your MRF and your MRF is what you use for all of your expenses along the way (Earnest Money, Inspection Costs, Cash to Close, Buy Down Funds, Reserves, etc…). Write a LOE to document these.
Your Reserves (usually 2 months of Mortgage Payments) is what has to be left in your bank accounts after you deduct your Cash to Close and close.
You can contribute more to Buydown in order to make a particular home that you want meet your affordability if you would have enough MRF in order to do so. Just make sure that your intended Buydown Funds are written into the Offer Sheet and Purchase and Sale.
You will have to ask your MC to see if you can get your Affordability raised.
Good LuckJanuary 19, 2018 at 5:43 pm #40041
Don’t let those doubts get the best of you. What you are probably doing is second-guessing yourself which will always lead to doubt and confusion. Looks like a “premature” case of what we kiddingly call the “Close to Closing Crazies”. This usually doesn’t happen until the final stages before closing when the buyer starts to irrationally imagine things going wrong and everything falling apart at the last second.
Let me go down the list one by one…
If the funds are immediately accessible, a money market account will be fine. The workbook specifies that a money market is one of the acceptable types of accounts. You will be advised by your closing coordinator how much money you will need to bring to the closing table, and you will need to get it in the form of certified funds from the bank prior to closing. If the funds are in something like a 401K where you cannot immediately access the funds, you will need to withdraw those funds and move them to your regular bank account before your bank app can be submitted.
Actually, the workbook says your reserves (not the entire MRF) must be in the bank at the time of closing. Things like inspections, insurance, etc. are all expected to be taken care of prior to closing.
Borrowing from the 401K would not be considered credit since you are “borrowing” the money from yourself. Again, remember that funds from a 401K must be withdrawn in advance and deposited into you regular bank account before the bank application can be submitted.
Since it’s already your own money, how could it be considered a new liability? It’s impossible for you to owe money to yourself since it’s already your money to begin with.
Don’t worry about telling us exactly when you are moving the money into your bank account. We’ll see it in your bank statements. Just get the money in the bank account since it must be there before the bank app.
As for having it in multiple bank accounts, just like your Payment Shock, it’s the total amount of money in your accounts that matters, not any one specific account.
Your counselor will advise you how much money you will need in total MRF, which will include buydown funds. As long as you have the rest of the MRF items covered including your required amount of reserves, anything else may be used for buy down up to the seven point limit for buyer contribution. Any funds you have beyond the seven points will buy down principal and may be eligible for a matching grant from the bank to further buy down the interest rate.
Plan for the worst-case scenario, that you will have to further buy down the rate, though it may not have to be a full point. Again, if you have more than seven points for buy down, the bank may be able to do a matching grant for the extra amount, and you can also ask the seller for a contribution toward the buy down.
Hope that helps!
Online Operations, NACA
firstname.lastname@example.orgJanuary 19, 2018 at 6:25 pm #40042
Just to clarify, if one were to decide to pull some money for the 401k for extra buydown, one does not have to notify the MC while getting qualified, but can just do it after making an offer but before the bank app? As long as the money comes into checking and the 401k repayment terms are spelled out in a formal letter, it’s fine just to do that just before the bank app stage?
Thanks.January 19, 2018 at 8:46 pm #40044
I would notify, because it will act as a loan which could change your “affordability”. Basically since it is a “loan” with a minimum payment it will add to your debt to income ratio and how much you qualify for. That amount could make you under qualified for the house your buying. So let him know so he can check the numbers on it and have a letter of explanation reader for when the underwriter sees it, or he will deny it anyway.
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