Payment Shock Question

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  • #65098
    FutureHomeownercrew
    Participant

    If my current rent is higher than the rent approved through NACA is payment shock still neccessary?

    I’m thinking about going to an ATD event but dont know if its worth it.

    If payment shock is necessary how many months do I need to shock of successful payment shock?

    #65105
    Nelsont
    Member

    Payment shock is not necessary if your rent is higher than 31% of your gross income. You still might want to start saving 200/month if you can. If your rent is say 28% and you were only approved for 25% then you will probably need to pay down debt before you can show payment shock.

    You can get approved for up to 33% as long as your current rent is higher than 31% and your debt is less than 7%.

    #65124
    Peapod0609
    Member

    What @Nelsont said is spot on. If you are trying to get a payment cheaper than your rent, then you might not need payment shock. But they usually like to see you save at least $200/month, if you can.

    Also to answer your other question, i believe it is typically 3 months for payment shock. If I remember correctly, it can be longer under certain circumstances but 3 months is the minimum they would like to see.

    #65129
    FutureHomeownercrew
    Participant

    Thank you both so much. So my rent is more than 31% of gross income. I am only able to save 100 here or there.

    The rent that I was told I could be approved for is less than my rent.

    The past two months I’ve been on budget but the month before those I did spend more because I have money in savings to cover that. Since then though my savings has increased and total I have about 25k in saving.

    I wonder if I should go to ATD or wait? My MC made it seem I should get approved once he submit my file but hes been dragging his feet.

    #65132
    Nelsont
    Member

    You were told you could be approved for less than your rent because the max is 31% and it is very well documented that once you go over you start running into issues as referenced by your ability (or inability) to consistently save more than $100. NACA in particular wants you to save at least 200/month every month and not an average, a minimum. Approving you for less than 31% would get you there. Or approving you for 31% would at least put you in a situation where you can keep your current lifestyle and still save more once you have a mortgage.

    Going to the ATD is always a good idea if you feel like it will streamline your process. If you are currently in position to get qualified by your MC then the ATD may be unnecessary. Your MC also should not be holding onto your files. If you need to wait to meet timelines then the event will do nothing for you. If you met your timelines completed your action plan and volunteered you can be qualified now.

    #65134
    FutureHomeownercrew
    Participant

    I have already volunteered and have done all my action plans and timelines. I’m at the stage where my income verification has been sent to MC but I have heard absolutely nothing from MC.

    I’ve called but still no response so I was thinking of going to an ATD so I wont have to continue dealing with the back and forth.

    #65147
    Peapod0609
    Member

    Going to an ATD event couldn’t hurt if you think you’re ready to be qualified, but it does sound like you are close to being submitted.

    If it is not a huge hassle for you to attend, I recommend it. I got qualified at an ATD event, it was great.

    #65172
    FutureHomeownercrew
    Participant

    I went and got pre qualified which I still cant believe how quick and easy it was!!

    They mentioned they didnt know why the MC was holding my submission up since everything was good to go.

    But now I face another question. When I saw the counselor they said I would get approved for 1383 purchase price of 241k but then when I went to the underwriter I got approved for 1383 but with purchase price of 202.

    I tried to get an explanation of the different quotes but hw only mentioned something about taxes. So I’m not sure what purchase price is correct?

    My purchase workshop will happen in the coming days. And maybe there I can get clarification.

    #65173
    FutureHomeownercrew
    Participant

    Also wanted to mention the counselor put in the numbers right in front of me showing me that the 1383 would give me purchase price of 241k. The uw on the other hand really couldn’t explain why it dropped to 202k.

    #65174
    Nelsont
    Member

    Don’t pay attention to the purchase price. There are too many variables out of your control. The important part is your MC and the UW both came up with 1383.

    You due to fluctations in interest rate you can have a house worth 200K today cost as much per month tomorrow as a house worth 300k if the interest rate jumped enough. I know for a fact the NACA rate is higher today than it was earlier this week.

    Then there’s taxes which vary WILDLY house to house based on various factors as well. Your neighbor can have a tax bill that is twice yours.

    The 241 (or 202) number is ONLY based on average taxes and interest. You might find out that people in new york state and chicago for instance have extremely high taxes and that 240 number might be more like 180. I also know for a fact that if I lived 2 miles south of where I am my taxes would be double and thus reduce what I can afford by nearly 100k.

    Look at houses on redfin or zllow. They already have the specific taxes for that property plugged in. Plug in 0 down payment. Move the interest rate down until you can afford the payment. That is 100% what your MC will come up with when you go to put an offer in on a house. It will not fail you.

    #65175
    vrundmc
    Participant

    Your payment has a few things factored in it. Look at a few homes in your purchase area and try the calculator at the bottom of the page:
    https://www.nacalynx.com/naca/Purchase/purchase.aspx

    Taxes in my area can range from $600-$1200 per month. That changes my purchase price greatly.

    • This reply was modified 2 years, 4 months ago by vrundmc.
    #65178
    FutureHomeownercrew
    Participant

    Thank you both soo much. Makes much more sense now. And that was very helpful @Nelsont about going on Zillow. I will also play with the calculator @vrundmc I appreciate yall help.

    Also do you know the lowest rate I can buy down to at the moment?

    #65179
    Nelsont
    Member

    If you use the naca calculator make sure you understand the tax rate on the naca caculator is not actual tax rate it’s based on mill rate so the values given 5-30% are actually x10 so 0.5-3% tax rate. If you lived in a county with 2.5% property taxes you choose 25% on the naca calculator.

    Incidentally a 1383 payment with the current rate of 3.125% interest gets you a 202k house at “30%” taxes which means your UW just plugged in the maximum rate in the calculator. Your MC is probably right. But you need to figure out what your taxes are in your area. That is the only way to find out your true affordability.

    #65181
    Nelsont
    Member

    Buy down is based on a few factors as well. In some but not all MSAs BOA is gifting members whose income is below 80% of the MSA median a free 0.5% interest rate deduction. In those areas the total buy down is limited to 5 points combined from buyer seller and grants if you are eligible for the BOA gift. Also if the gift is available in your area and you are eligible it is automatic and you cannot opt out (the only reason you would want to do this is buy down more than 5 points). Otherwise it seems the limit is 0.125%. This also appears to be brand new and there is no literature on it.

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