I read in the homebuyer workbork found on the NACA website the following:
“Members at or below one hundred percent of the median income for the area in which they are purchasing
can buy-down their interest rate to virtually zero percent. In addition, participating lenders provide millions
of dollars in grant funds to match buy-downs greater than approximately 6.5% of the mortgage. Note:
this program is subject to change. Members above the median income are generally limited to buy-down
points not exceeding six (6) points.”
This leads me to believe that since I am a targeted memeber then I could buy down as many points as I choose. But then I see stuff on this forum that is conflicting. Bank of America is our assigned lender.
What is accurate? We have been basing what we can afford off of buying down interest rate really low and now I am worried that we can’t afford to buy, since we were relying on lower interest rate.
I think I have figured it out after reading some of the other post in this forum and all may not be lost for me.
Basically You are limited to buying down the interest rate with your own funds to the amount determined by using the following equation(this is for Bank of America):
7% of loan value – $3,000 (Bank of America fee paid to NACA) – 3% of any repair funds in escrow
That will determine the max funds you can contribute to buying down interest rate. After that any funds that you contribute would go to principal reduction and Bank of America will match that amount towards buying down your interest rate even further.
If anyone disagrees with my understanding then please let me know. Otherwise I will keep this post up as maybe it will help someone else. I can also provide an actual example if someone wants to see it worked out.
Your second post seems accurate to me, based on my own meticulous forum-scouring.
If you are indeed at or below median income for your area, BofA will provide matching grants for any amount above 7%. If you have extra funds to contribute beyond that amount, those funds will go toward principal reduction (aka downpayment). Good luck!