What does On-Going Savings Mean w/NACA Buy-down

Home Forums Purchase Program What does On-Going Savings Mean w/NACA Buy-down

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  • #36067
    GazelleFocus
    Member

    According to the Homebuyers Workbook in regards to taking advantage of the interest rate buy-down.

    The NACA Buy-Down is only available with a NACA Mortgage and is only available at the bank loan
    application stage and cannot be applied once you have closed on your loan. Thus, the NACA Buy-Down
    requires that you have savings available to take advantage of this tremendous benefit. The funds can come from the seller, grants, your existing savings, on-going savings, and/or a gift from family that does not require repayment. If you are utilizing the NACA Buy-Down as part of your NACA Qualification, you must document the source of the funds to be applied to the NACA Buy-Down as part of the minimum required funds (explained in detail on page 42).

    What does on-going savings actually mean? Does this mean we can project how much we will have at the time of closing to bring to the table? We’re planning to go with new construction so that would give us 4-6 months to save even more money for the buy down.

    Need help understanding this!

    #36074
    TTrumble
    Member

    Hello GazelleFocus,

    As your quote from the Home Buyer’s Workbook noted, you must have your buy down funds available at the time of the bank application. Any money you can save up before then can be used, up to the maximum buyer contribution of seven points. Additional funds saved after that point may not be used for buy down.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #36075
    GazelleFocus
    Member

    Thanks, Tim.

    Sorry if this is a silly question, but I am a novice to home buying. Does the bank application happen when you go under contract?

    #36078
    TTrumble
    Member

    Hello GazelleFocus,

    The bank application is typically sent about 10 days after the Purchase and Sale Agreement is signed and submitted.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #36080
    GazelleFocus
    Member

    Okay! Thank you, Tim.

    #45885
    allybella
    Member

    Is 7 points the maximum points you can buy? also if its a gift from my parents do they have to write a letter stating its a gift is there anything required from them? and if i buy points will it help me get approved for a higher mortgage loan amount?

    #45887
    vonda43
    Member

    @allybella…I think 7 points is the maximum. It might depend on the lender that you will be using. If your parents gift you the money, they will need to write a gift letter and they will also have to provide their bank statements to prove where the funds came from. It cant be borrowed funds. Yes, if you buy down points you can get approved for a higher mortgage amount. The NACA calculator is a great tool if you are planning on buying down.

    #45894
    pratik
    Member

    7 points (or less, depending on the lender) is maximum buydown amount FROM BUYER. If you are a priority member, any additional amount you put in will go towards down payment and that additional amount will be matched by the lender towards your buydown. Additionally, the seller can give up to 10 points towards buydown. So, any negotiations with the seller and resulting differences should be put towards buydown rather than bringing down purchase price or free upgrades etc. Buydown will bring interest rate down and can have significant impact on the Interest component of your mortgage (PITI). This means lower mortgage amount for a given purchase price. If you have certain mortgage amount that you can afford, bringing the interest rate down will help you go for a property with higher purchase price. However, keep in mind that house is a liability (because it is a loan + one has to pay property taxes and insurance premiums etc.) so go with the smallest/cheapest that you are comfortable with! If you have extra money at hand, invest towards your retirement! Best wishes to you!

    #45916
    TTrumble
    Member

    Hello allybella,

    Seven points is the maximum amount you as te buyer may contibute toward interest rate buy down. From that seven points, BOA will subtract the $3000 broker fee plus a HAND fee of 3% of any repair or rehab fund. The remainder is applied to interest rate buy down.

    Vonda43 is correct about verification of gift funds and pratik was (as usual) right on the mark about the seller contibution and bank match.

    Interest buy down can indeed increase you maximum mortgage amount. Since a lower interwst rate means less money goes toward interest each month, there is more available to go toward principal each month. That in turn means a larger possible principal (i.e. purchase) amount at the same monthly payment.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

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