Down Payment?

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  • #67126

    So I plan to purchase a new construction home. Of course with any purchase, they’ll want to know how much you’re putting down. By going through NACA, is the down payment amount included in the MRF?

    #67127
    Nelsont
    Member

    There is no down payment with naca. You will receive a 100% debt to value (dtv) loan as opposed to FHA 95-96.5% and 80-90% dtv through conventional means.

    Private mortgage insurance (pmi) is required until your dtv reaches 80% or less and can add a couple hundred dollars per month to the cost of the loan and thus decrease your buying power by $50,000 or more EXCEPT with naca where there is NO pmi.

    If you wish to put money down it will instead first be used to buy points which is the technical term for buying your interest rate down. You can also have your seller or builder provide this as part of the seller concessions in the contract negotiations. Once you reach the max buy down amount any other funds will be used to reduce principle which would be a down payment but only if you want. Typically people who go through naca and have the ability to put 5% cash down apply it to the interest buy down instead and then don’t have extra funds to reduce principle…5% toward interest reduction will lower your payment by about $200 or increase your buying power by $50,000 or more while that same 5% used as a standard down payment would decrease your payment by maybe $50. Of course it’s all optional.

    You will be required to put down a deposit which can be anything the builder decides but is often in the 1-3% range maybe up to 5%. If you elect to not buy down the interest or principal this is returned to you at closing minus the prepaid taxes and insurance which go into escrow for the coming year. This deposit is included in your mrf.

    However the mrf when first calculated is a rough estimate based on the typical market and may only include a $1000 emd as outlined in the workbook as a suggestion only. Builders often have higher requirements so that’s just something to take into consideration. Your mrf might be 6000 based on a 1% emd but if your builder wants 3% then your mrf is actually maybe 8000.

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