Pros & Cons with NACA

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  • #39448

    Folks,

    I’m confused about making the final decision who I’m going to acquire a loan with. I’ve spent countless of hours reading through this forum to help guide me to this decision and some days I know its NACA I should proceed with and others and I’m thinking why should I stress myself?

    Pros:
    – 3.65% Interest Rate (FNMA 4.25% – $69.00 difference on a $200k loan)
    – No closing cost (FNMA will have closing cost)
    – No down deposit (FNMA requires 5%)

    Cons:
    – “PMI like” $50 payment each month for a minimum of 5 years to a maximum of 10 years (FNMA’s PMI is $88 per month until the LTV reaches 80% or I can buy out the PMI for $4500.00 and have no PMI payments)
    – $25,000 silent 2nd lien on your home (FNMA has no silent 2nd)
    – Need permission to take out any equity on YOUR home which your request could be denied. (FNMA doesn’t care)
    – Can never turn property into investment home or will need to pay a $25,000 “fee” or face foreclosure from NACA. You could refinance, but we all know rates are about increase very soon. (FNMA requires you stay in the property for at least 1 year or face a $10,000 penalty.) Lastly, you could pay the home off which is the next only way to take take the silent 2nd off.
    – It’s hard to find a grant program to work with NACA. (NC Housing works with FHA where you can get up to $10k payment assistance)

    What are/were your pros and cons about NACA?

    #39449

    I was thinking the same thing. The only conclusion incanenuonwith as of now is to use NACA then refi immediately!!!

    #39450
    DeeCee
    Member

    I’m confused by your first bullet under cons. I don’t pay anything like that with my NACA mortgage.

    #39451

    Hello DeeCee,

    It’s called the Neighborhood Stabilization Fund Fee.

    General Requirements
    NACA provides the NACA Workshop to everyone without becoming a NACA Member. After attending the workshop, should you decide to begin the NACA Program and the initial counseling, you need to be a NACA Member in good standing. This requires that the Membership Agreement and Authorization be signed by all household members. At your first individual meeting with a Mortgage Consultant, you will need to pay the Membership Fee, (for 2007 is $20 for the year). Once you purchase your home, you will need to pay the Membership Fee, which includes the Neighborhood Stabilization Fund Fee,of $50 a month for a period of between five and ten years, depending on the amount of the mortgage. The Membership fee entitles you to not only NACA’s comprehensive counseling to assist you throughout the home buying and mortgage process, but also to NACA’s membership assistance for NACA homeowners that provides comprehensive foreclosure prevention assistance.

    #39453
    DeeCee
    Member

    Hi, I think they discontinued that a few years ago. Read the current handbook.

    #39454

    Thanks DeeCee

    I pulled that information directly from their website, but I’ll go through the handbook.

    https://www.nacalynx.com/nacaweb/purchase/eligibilityIntro.aspx?language=&menu=none

    #39455
    TTrumble
    Member

    Hello Searching4Homes,

    You are looking at some highly outdated materials. Your second post even notes that you are quoting 10 year old information. In fact, that link you posted isn’t even part of the active NACA website anymore. I’m curious why you are using such obviously obsolete information.

    – “PMI like” $50 payment each month for a minimum of 5 years to a maximum of 10 years (FNMA’s PMI is $88 per month until the LTV reaches 80% or I can buy out the PMI for $4500.00 and have no PMI payments). DeeCee was correct. The monthly contribution to the Neighborhood Stabilization Fund was removed several years ago.

    By the way, in no way was it “PMI like” because PMI protects the INVESTOR on your loan in case you default on the loan. You receive no benefit from PMI at all. The NACA Neighborhood Stabilization Fund helps the HOMEOWNER in the event they should fall behind due to hardship. That’s a huge difference! You also have the help of the NACA Member Assistance Program always as close as a phone call, which you do not have with a Fannie Mae loan.

    The “silent second” exists primarily to enforce the owner occupancy requirement of the NACA program. NACA requires you live in the home for the duration of the time you have the NACA mortgage. The NACA program is about Neighborhood Stabilization through home ownership and building personal wealth and financial security for the homeowner. The owner occupancy requirement also exists to prevent greedy property investors from abusing the NACA program. If you sell the home or should refinance, the lien is easily removed.

    There are in fact hundreds of down payment assistance programs across the country that are compatible with the NACA program, and your local counselor should be able to help you locate any such programs in your area. Additionally, many professional, fraternal, and even religious organizations have programs for their members that a little research could easily uncover for you. In North Carolina for example, the House Charlotte program works very closely with NACA in providing down payment assistance grants. The North Carolina Housing Finance Authority also has assistance available up to $15,000 if you are buying in specified counties. It’s not that hard to find something as long as you are willing to do some detective work.

    Also “NC Housing works with FHA where you can get up to $10k payment assistance” is worse than no help at all since FHA will charge you PMI every month, roughly $150 per month on a $200,000 loan. Going with FHA will cost you A LOT more than any benefit you would receive from the $10,000 you might get through that program.

    And by the way, the $69 saving per month because of the lower interest rate equates to a savings of $24,840 over the life of the loan.

    So let’s total it up:

    Interest savings: $24,840
    PMI savings: $54,000 ($200,000 home)
    Closing costs savings $ 4,900 (national average)
    TOTAL SAVINGS W/NACA $83,740

    So is it worth the “stress”? Let’s compare it to a part time job. If you have to put 200 hours of effort into completing the program and closing on your home (which you won’t, but I wanted to use an extreme example), that part-time job paid you $418.70 per hour.

    Even if you remove the PMI from the picture, it’s still $148.70 per hour. Awfully nice part time job, huh?

    When you look at the hard facts and accurate information, it will always prove that you will never beat the advantages of the NACA program.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

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    #39469

    I also want to point out that a Fannie Mae HomeReady mortgage requires 3% down, or $6k on a 200k home. Perhaps that not relevant if you are getting down payment assistance of 15k. But even if you are getting that assistance, as @Ttrumble mentioned, If you put that 15k toward a NACA buydown instead, your rate would be 1.75 (or 1.875? Never clear on the nitty gritty of fees) rather than 3.625, and that low interest rate would significantly reduce your payment and help you build equity faster (especially after year 5, when buydown benefits start outweighing any down payment you would have done instead.

    200k, 15k down, 4.25% and $88/ mo MI = $910 principal and interest.
    Same with NACA 15k buydown (7.5% buydown to 1.75%) would be $714.

    That’s 200 a month. Even when mortgage insurance goes away, it’s still over 100 a month cheaper. Something to consider.

    Edit – I see that your loan alternative asks for 5% down. Same theory still applies.

    #39470

    So I think it comes down to whether you want to buy an investment property. FYI, you could always buy a second house as investment, but you wouldn’t get first time home buyer incentives, of course. But NACA does allow you to buy additional property during the life of the loan.

    #39480
    Swtneka3
    Member

    For me it was the credit and buying down your rate. I have no credit but my husband score is high 700s. Other Lenders go by the lowest score btwn the couple. With naca we were getting the best rate no matter the score.

    #39495
    pratik
    Member

    Pros:
    1. awesome forums of NACA customers (members) who happily share their first-hand experience. Can’t find it in any other program and the buyer is an uninformed victim of the builder/seller/agent!
    2. buydown to 0.0625% interest rate, resulting in hundreds of thousands of dollars of saved interest
    3. no PMI
    4. 0-down
    5. no closing costs

    Cons for considering an investment property through NACA (NACA is not helping families to buy investment properties, so not a con technically):
    1. 25k lean (fair) – I would add that they go case-by-case on waiving this lean. e.g., temporary job out of town for a couple of years and your plans to coming back, they will let you rent the property for that period by waiving that lean! NACA is not after money, it just wants to make sure that their efforts help people get a home and not an investment property!

    Cons:
    1. MCs are awarded bonuses for achieving targets – however, they are not awarded for “over-achieving” the targets. So, MCs know exactly how much they need to work for a given month (e.g., x number of “targeted member closings” and y number of “non-targeted ember closings” and that y should not be more than z) – this creates delays in their calendar. They are purely driven by these targets and if they need to do 15 closings in a month, they will defer 16th closing to the next month, because if they don’t that 16th closing just went to a wash!!!
    2. wait times of 3 months? this is ridiculous! (probably side effect of #1 above)
    3. administration of the program can be more efficient (but in current state, it is still worth it as @ttrumble noted) (probably side effect of #1 above)
    4. Tedious book-keeping for qualification (which is actually a PRO – I realized through this process that I was actually saving more than I thought I did!!!)
    5. MCs sometimes having their own opinions about how NACA works (not a case for me, but I have heard a lot about it in forums) (probably side effect of #1 above)
    6. not allowing solar and energy-efficient upgrades on new constructions (unless the builder provides it and charges you for the same)
    7. RED is much slower (I have never dealt with it, but heard about it on forums)
    8. Regional purchase limits (which is not a con, as it aligns with their goal of neighborhood equality, and “target areas” which at times are outdated offer some leeway to savvy buyers)

    Other observations:
    1. grants can work with NACA, but it would be more work on buyer’s end on getting everyone on the same page. Still completely worth it!
    2. NACA needs to add more man power at every level. There are only one or two key persons for each department and there is only so much one person can handle. Delegating is the need to make this program widespread and achieve NACA’s goals
    3. NACA system, while it is great, can be improved significantly by investing in IT and this way NACA can be a rocket mortgage. Seriously, the MC is scanning the bank statements – why not just have people upload their statements online and have their files/folders visible to ensure that their uploads are complete? or just collaborate with mint.com or similar so that NACA can scoop out history of all the accounts of the members once they sign the agreement. This way, the qualification would be much more efficient, streamlined and faster. Wait times will be squeezed from 3 months to 3 days once this is in effect.

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