May 10, 2021 at 2:42 pm #75416
I completed my workshop back in April, and my intake appointment is scheduled for July. I decided to explore my options, so I recently spoke with Bank Of America about their Home Grant program. They told me that I wont be able to qualify, due to having little savings. My DTI is also a little high. I also have around $5000 of credit card and car loan debt, to go with over $40k of student loan debt. I plan on having the credit card and car loan paid off by August. The loan officer’s plan of action for me, is to stick to my plan to pay off the credit card/auto debt by August. He also said I need to save $15k to qualify for a $250k loan, or $10k to qualify for a $195k loan. This savings, along with the Home Grant would cover down payment and closing costs. Essentially, I’d be able to manage a mortgage while also paying down my student loans. I didn’t realize that I needed to put up so much money.
How would NACA compare to this? I don’t have much of a savings, due to doubling, sometimes tripling up on debt payments. The meeting with Bank Of America has discouraged me a little. It would probably take me years to come up with any funds that NACA requires as well. Is there a catch to NACA’s zero down payment and closing costs?May 10, 2021 at 3:12 pm #75417
Today’s naca rate on a 30 year loan is 1.875%. Today’s BOA rate is 2.75%.
That’s a difference of about $85/month on a 195k loan and $110/month on a 250k loan.
If you can afford 195/250k through naca you are looking at maxing out at 165k through BOA because they will add PMI to your mortgage loan which decreases your affordability. Naca does not add PMI. In fact there are only 3 ways to avoid PMI: naca, VA loan (maybe???), 20% or greater down payment.
Conversely if BOA said 195/250k then naca you are looking at 220/280ish.
Then this is all assuming you have a 760 credit score, minimal debt and a lot of savings. Every bank in the entire country advertises lowest possible rates. If you are not in the upper echelon (most of us aren’t) you are looking at maybe a full percent or more above the advertised rate. So bank of america’s advertised 2.75% will might actually be offered to you at 3.5 to 4%.
That in turn will reduce your 165k loan maximum at 2.75% to say 130k loan maximum at 4% interest.
Assuming it was naca who said save the 10 to 15k then that covers your property taxes and insurance (which you are required to pay up front) and 2 to 3 months of mortgage payments which keep so when it’s all said and done you have a rainy day fund and are not exhausting your savings by buying a house.
With that said it is always encouraged to shop around for loans. You will need to write letters of explanation because they will appear on your credit report. Just do not go through with the loan while also going through with naca. You can apply and pick one but not both.
If you go through home grant you are looking at 3-5% down payment minimum (7 to 10K) or 2 ish % closing costs unless you get both BOAs down payment grant and americas home grant. But again you will have PMI which is 0.5% of the loan payment for 7 years or until the DTV dips below 80%.
So that’s essentially how naca compares. To some people it’s not a big deal. Others are approved for more than they want to spend. Most of us want to maximize our affordability and that means naca.May 10, 2021 at 3:42 pm #75418
Sorry for the misunderstanding. BOA was the one who told me to save 10k to 15k. I’m not sure what NACA wants me to save. At the moment, 31 percent of my gross monthly income is going towards debt. I then put $200 towards savings. I’m curious to know how much NACA will require me to save. My biggest concern is not being able to purchase a home until years from now.May 10, 2021 at 3:55 pm #75419
The general information is in the workbook available for download on naca.com
EMD (naca plugs in $1000 but is typically 1 to 3% of the offer price – This money is applied toward your prepaids such as insurance and taxes
Insurance (plan close to 1000 but you are probably look at maybe 500 or 600)
Taxes (average property tax is 1.5% but could be as high as 3.5% or as low as 0.7% or so…that’s roughly $2000)
3 months piti (this will be roughly 3000)
Buy down (as much as you want)
So what I laid out is about 6000. You will likely need less than that.May 11, 2021 at 11:35 am #75439
Got it. Just to get an idea of what I should do prior to my July intake appointment:
-Using 31% of gross monthly income ($1400) to pay off credit card/car debt by August. I am not renting
-Putting $200 of monthly surplus in savings
-After August, the $1400 will go in savings as Payment Shock. Hopefully to achieve MRF
-Hopefully find a grant to help with buying down interest
Is it possible to become qualified before paying my debt off, and coming up with the roughly $6000? I hope to qualify for somewhere between $200k-$250k. Home prices in the Atlanta area have been increasing.May 11, 2021 at 1:37 pm #75445
Absolutely. There is no rule that says you can’t have debt. Obviously having zero is best but you are allowed 9% of your gross income in debt. Every percent over 9 decreases your qualification amount from 31% to 30 to 29 and so on. You will receive an action plan based on what you want to do.May 11, 2021 at 2:58 pm #75451
How would my credit card/car debt apply with my 40k in student loans though? They’re on deference at the moment. The BOA guy wasn’t too clear about my DTI. My annual salary is under $53kMay 11, 2021 at 3:13 pm #75452
Naca takes your minimum credit card payment to apply toward your DTI. Your car loan is simply whatever that monthly payment is. You are allowed to have your student loans in deferral but you are not allowed to have zero dollar payment considered so you would you need to get a letter from the loan servicer stating what your payment would be if you had to start paying today.
For argument’s sake lets say you make 50k. That’s 4166 per month. 31% of that is 1291. That is your maximum monthly mortgage payment including taxes and insurance. That is the goal you should shoot for.
Now, with that 1291 you are also allowed up to 9% or $375/month for your car, credit cards and student loans combined.
Let’s say your car, credit cards and student loans combined equal 600/month. That’s 14.4% debt which is 5.4% over the max. That means your 31% or 1291 mortgage becomes 25.6% or 1066/month.
Make sense?May 19, 2021 at 12:50 pm #75542
I came across a video that NACA will be making major changes with their interest Buydown program. My intake isn’t until July, and I won’t be done paying of debt until the end of August.
I was told that I should explore my options outside of NACA. The only issue is that I barely have any savings for a down payment due to paying off debt.
Here is the videoJune 19, 2021 at 6:43 pm #75794yareda2021Participant
@nelsont.Thank you for your usual support. I am qualified with new rule & in house search.The amount approved is $348.7k with my my current PITI almost buy nothing in my area/CO. Even if you look average house.I want to increase my loan amount by investing $30k or $50k.How much increase this investment in buy down brings in my loan amount? Will this decrease my PITI/ monthly mortgage payment?If I want to buy a house worth of $450k can I do that?Please use house worth $375k & $401.2k and $450k as examples to answer my questions since this is very important than any things in this process?.What other options we have to increase our loan amount?If my wife(currently not working) get a job.Can we submit the two pay check to increase our house hold income & increase our PITI/ loan amount? Thank you in advance.June 20, 2021 at 10:20 am #75795
No bank will ever ensure you can buy a house in your intended market. Going through underwriting is nothing more than what kind of loan you can afford. It’s up to you to find a house you can buy with that loan. I always you can make minimum wage in Manhattan and be qualified for a home loan but we all know there’s nothing in Manhattan at that price range.
Before anyone can run the numbers 348.7 doesn’t mean much. You actually are not approved for 347.8. If the interest rate goes up then you are approved for less than 347.8. If the interest rate goes down you are approved for more than 347.8. The interest rate goes up and down every day.
Then there’s insurance. A 450k house will have higher insurance than a 300k house. A 300k house with a pool will have higher insurance than a 450k house without a pool.
Then there’s taxes. Each county and city within the same MSA will have different tax rates. A 347.8 house in Denver will have a different monthly payment than a 347.8 house in boulder.
For these reasons you can find a 400k house that has the same monthly payment as a 350k house. So don’t go by sale price. Go by your monthly approved piti.
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