Credit card debt/ car loan & payment shock

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    I completed the NACA workshop back last week, and have an intake appt set in early July. I’m currently working on paying off my credit card debt and car loan. I’m hoping to have both balances paid off by August. By the time of my intake appointment in July, I should be a little under $2500 in credit card/car debt. The only debt remaining would be my $40k in student loans, which is in deferment. I don’t have much in savings, due to aggressively paying down my debt. I have a great credit score, and I make my payments on time. Also I stay with family, so rent is not an expense in my budget.

    How would payment shock apply to me while I’m still paying down this last bit of debt?

    Also I read that I need to come up with MRF. Would this come from the savings built from months of payment shock. Or should I pay less debt, and save more now?


    If you don’t pay rent your payment shock will be the full value of the mortgage payment you seek. You will need to get your family to write a letter explaining who you are in relation to them, that you live with them rent free and whether you or not you contribute to household expenses. Have them include the address and specific dates you started living with them up to the day you submit the letter. They need to print it out and wet sign it. This will also be required every step along the way to be revised with new signatures and dates. It also doesn’t matter if you contribute to household expenses or not, the underwriters just want to be able to match up your spending habits to your bank statement. It’s a nuisance but, it will get you a house.

    The rule of thumb is save every last penny. If you can pay down debt and save then do it. If you are paying down debt in lieu of saving then you will need to write a letter of explanation for each month you miss your payment shock. The issue is if you can pay down debt AND save but don’t. Otherwise you’ll be fine. Just figure out what works best for you.

    MRF can come from anywhere as long as it’s trackable. Generally yes saving your payment shock will contribute to your MRF. You can have the money gifted as long as it’s not cash.

    Again it’s all about your timeline. Saving without paying down debt will get you a house faster but you will be approved for less due to your debt. To get approved for your full potential you need to pay down your debt first. It’s up to you.


    Thanks. Do I need to have my family write letters now or after my intake?

    I would like to be approved for more if possible, but I don’t wait to wait too long either. My original plan was to continue making big payments towards my debt, until they start the payment shock at my intake in July. By that time, I’d only have a small amount of debt left, and could start the payment shock right away. Will they calculate the amount of my payment shock at intake?

    Also, how long does the process from first intake to being qualified usually take?

    • This reply was modified 5 months, 3 weeks ago by ericleap.

    Have the letters dated the day of your intake.

    Your payment shock can actually be back dated. If you demonstrate 3 or more months prior to intake then you already have that requirement checked off. Just remember payment shock never stops. It’s a requirement to get qualified. It’s also a requirement to continue until you close on the house.

    Take 31% of your gross income monthly income without overtime or bonuses. That is your maximum approved monthly payment. Subtract your rent from that number. That is your payment shock. Since your rent is 0 then your payment shock is 31% of your gross monthly income without overtime or bonuses. Knowing that can get you started early.

    There is no timeline because every case is unique. Each member is evaluated on a case by case basis without exception and therefore cannot have a predetermined timeline. Your counselor will set a goal for you at intake to be ready to qualify by a certain date. This goal is arrived at by reviewing your finances with you.

    Some people enter the program already pre approved with another bank and take only a few weeks to qualify. Some people take months or years depending on the debt they need to take care of. Without knowing your specific details I would say plan on a few months. If you don’t demonstrate payment shock until then that’s 3 months right there. If your debt prevents you from getting approved from as much as you want then you get qualified when your debt is paid off. If you can start payment shock now there’s a chance you can be qualified this summer.


    That would bring my payment shock a little over $1350 a month. It’s doable, but it will be very tough while I’m also making bigger than minimum payments on my credit card/car debt. I originally thought it would make more sense to pay of my debt, so I could be approved for more.

    Also, I’m very confused about the payment shock method. I thought throwing my payment shock in a savings account would be enough. I’m reading that doing that method isn’t what NACA is looking for.

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