December 10, 2019 at 12:23 pm #63038
Based on my current income, I would need to find a home under $210,000 according to my calculations. Currently I live in Austin, Texas. Finding a decent 3 bedroom home for under $300,000 in Austin or surrounding areas is going to be a major obstacle unfortunately unless I were to move like an hour away from where I work which is not ideal.
What if I were to relocate out of state? I’ve considered moving to Las Vegas, NV. I would have a lot more options when it comes to homes in my price range if I were to move there. However, I’m just wondering how this would impact the NACA process. Assuming I undergo the application process and become qualified, etc. Assuming I get a job offer in Las Vegas equal to or greater than what I make now, etc. would I have to undergo an additional process or start the qualification process over?December 10, 2019 at 12:42 pm #63039NelsontMember
Short answer – No. While it is unadvised to move during the process you certainly can. In the situation you have outlined you would go through a change in MCs which can also start the review process over (but definitely not put you back at square one – all of your hard work, savings and time line requirements will still be in tact).
Before you make such a drastic move have you considered what it would take to buy down the interest rate to be able to afford a $300,000 house? You can ask for seller concessions which is extrememly common and done on hte vast majority of all contracts. You can try and get the seller to contribute 5% toward “down payment assistance” which would automatically be applied to interest rate buy down which would lower today’s rate of 3.375% to 2.125% which would effectively lower your total monthly payment by like $150 without spending a dime! Then if your income is 80% or less of your MSA median income then you can get 0.5% chopped off the interest rate giving you a 1.625% interest rate and a monthly payment on a $300,000 approaching the monthly payment of a $210,000 house, again, without spending anything! You can even put more of your own money down to lower the interest rate to 1.125…Just something to think about.December 10, 2019 at 12:49 pm #63040BakerTheBakerMember
I definitely agree with the buydown option being the best consideration. It makes an enormous difference in affordability and is one of the very best features among the many great features of the NACA mortgage. Seller concessions are easy to come by – even with the new construction we’re seeking, the builder is offering $10,000 in concession. This is because that’s their incentive to use their in-house mortgage company, but their company couldn’t approve us, so we still get the incentive. I understand this is also common. There’s a great chart in the handbook showing how interest buydowns affect total purchase price to see if something more is within reach. In this area, 3-5% closing cost help from the seller is fairly common, which is a huge chunk off the interest rate.December 10, 2019 at 3:34 pm #63059
I guess I’m just confused about buydown and how the formula works to get the lower percentage? What is a seller concession? Sorry I’m super new to this. I can come up with approximately $7-$10k of my own money for buydown.December 10, 2019 at 3:49 pm #63061NelsontMember
When you want to buy a house and draw up a contract there is a negotiation period before the contract is ratified that includes the buyer asking for things from the seller. This can include making certain repairs or providing help in closing costs among many other things. Generally speaking asking the seller to pay for your closing costs is very common – I once had an agent who said they ask for that on every deal regardless. Since there are no closing costs with NACA then any amount of money the seller agrees to give to you will be applied toward either principle buy down or interest rate buy down (the interest rate buy down application is default and a much bigger benefit). It’s also usually not a big deal because the money is usually not coming out of the seller’s pocket (nor is it going into yours). The bank will divide the money up and give the seller the difference upon the sale. So if you buy a house for 300k and the seller agrees to provide 5% closing assistance then the seller will get a check for 285k with the bank keeping 15k as the cost of the buy down. This will not happen if there is no equity in the house though so a a flipper will have to actually cut a check which also usually is not a big deal since they should have a business cash flow to cover this. Does that make sense?
So the formula is you can buy the rate down in 0.25% increments at the cost of 1% of the loan amount. So for a 300k house each 0.25% of interest will cost $3000. 5% seller help is $15000. That equals a 1.25% rate drop.
Also depending on the cost of the loan each 0.25% rate drop might be a savings of $15-50/month. This is what makes expensive houses affordable. At 3.5% interest a 300k house might cost in total over $2000/month but at 1.5% it will be closer to $1500/month.
December 10, 2019 at 4:03 pm #63063December 10, 2019 at 4:19 pm #63064TTrumbleMember
- This reply was modified 1 year, 9 months ago by Nelsont.
Just a rough “guestimate” says you would need to buy down your rate from the current 3.375% all the way down to about 0.75% to be able to afford a $300,000 for what you state you can afford now. Unfortunately, until we renew our buydown program with Bank of America, getting it down that far just isn’t an option on a 30-year loan.
Right now, you may not buy down more than five points (five percent of the mortgage amount) total between you and the seller, which translates to a 1.25% rate reduction (from 3.375% to 2.125%). Plus if you are under 80% of the median income for your area, Bank of America will automatically grant you a one-half percent rate reduction, making the lowest rate possible at the moment 1.625% (which probably translates to about a $265,000 house).
Any funds that you have beyond the five points can be used for principal reduction, this includes personal funds, grants, gifts and seller concessions.
The median home price in Las Vegas is considerably lower than Austin ($110K in fact). But you have uprooting and starting over in a new city to consider.
The key factor with regard to moving and getting a new job is how long you would be between jobs. If it is under 30 days, you shouldn’t have any problem. If it is more than 30 days, you’ll probably have to rebuild a two year employment history.
I’m afraid you are the only one who can make that kind of huge decision regarding possibly moving. The best thing you can do is gather all the facts and weigh them carefully. Please keep us updated.
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email@example.comDecember 10, 2019 at 4:28 pm #63066
@ttrumble Thanks for clarifying. $265,000 would give me more options then $210,000, I may be limited to a 2 bedroom or a condo in Austin which wouldn’t be my preference but at least it’s a step up from an apartment.
As far as relocating goes – Hypothetically I wouldn’t relocate without a job offer so there would be no gaps in employment, though housing could get tricky. I’m guessing I’d have to stay in an Extended Stay hotel type situation until I could actually close on a home because from what I’ve read the closing process can take some time, so I’m not sure how temporarily moving to an extended stay hotel would impact my application if at all.
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