If you have read any of my former posts, you probably know that at one point my husband and I were what you would call in the South, a financial “hot mess.” In order to get out of it, we decided to sell everything but the kids (trust me, at times I was really tempted) and rent until we became debt free (about $150K in debt).
Getting started on buying a home
After our debt payoff we knew we wanted to buy a home. Once we built our emergency savings and saved enough for a 20% down payment, we explored our options. We researched home-buying programs in our state (Georgia) and learned that the definition of a “first home-buyer” varied. It could mean you have not owned a home in the past 2-3 years or it could mean that you do not own a home at the time you enter the program. We also learned that some home-buying programs do not have an income cap.
As I explored programs, a few friends of mine mentioned the Neighborhood Assistance Corporation of America (“NACA”) program. NACA is a nonprofit, HUD-approved community advocacy and homeownership organization. NACA partners with banks such as Bank of America and Citigroup to provide affordable homeownership with a focus on low to moderate income people and communities, particularly those who are credit challenged.
In general, the potential home-buyer (oftentimes called a “member”) is required to meet the following criteria:
- You must not own another property when closing on the NACA mortgage
- The home must be occupied by you, the buyer, for the life of the NACA loan
- You must volunteer to help with the program (there’s lots of flexibility in what is considered volunteering)
Some of the perks of NACA are:
- No down payment
- No closing costs
- No points or fees
- At or below market interest rate (everyone receives the same terms)
- Ability to buy down points to virtually zero (the points a member can buy down typically depends on the buyer’s income and chosen mortgage – 15 year or 30 year)
- No income maximum or minimums
- No perfect credit required
- No credit score consideration (approved based on individual circumstances)
- No Private Mortgage Insurance (PMI)
Our friends were honest about the fact that the process is slow and the paperwork is huge. Since my husband and I were flexible on the date we wanted to own a home, we said what the heck, and started the NACA process.
Our personal NACA experience
You can talk to 10 people who went through the NACA process and you will hear 10 different perspectives. This was our personal experience, which I understand may vary from other people who used NACA for a home purchase.
Getting started: the first home buyer workshop & working with your MC
First, you must attend a workshop to get into the NACA Program. After the feedback from friends who went through NACA before, we went ahead and attended the workshop a year before our desired home purchase date. Luckily we got there early, as there were over 300 people in attendance.
The presenter did a great job going over the good, bad and ugly of the process. He mentioned the process can take a year or more depending on the financial stability of the member. You get a workbook explaining the process. Afterwards, I had to fill out paperwork and I was told that we would be contacted for our first meeting.
In my case, I had to reach out to NACA to schedule our first meeting with a housing counselor (sometimes called a Mortgage Consultant or MC). The first available meeting was a month later.
Meeting with the Mortgage Consultant (“MC”)
The main job of the MC is to ensure you are ready for homeownership. We had a huge list of required financial documents. We also needed to get a tax transcript of our last two tax returns. We had to have ours sent by mail, which took about 2 weeks, so in retrospect, we would have ordered our transcript before that first appointment. We also needed employment verification information.
Our MC combed through all of our financial information to verify our monthly savings, income, expenses and on-time payments. We had to explain any unusual deposits, including tax refunds. The MC entered our financial information and gave us an action plan of additional information needed to move forward. Our MC also discussed the mortgage options and we were told our maximum home purchase price. The total meeting time was about 2 hrs.
Working with your MC
I had read so many comments about how difficult it is to communicate with an MC, so I asked when was he typically at work (including upcoming vacations), the best way to communicate with him (email, through the NACA portal, by phone, etc) and the most efficient way to send him requested documents. From what I understand, most NACA offices are understaffed and the MCs are typically overworked. That basically means your MC may not have time to consistently work on your file.
Consider scheduling appointments, even if by phone, to block out time for your counselor to focus on your file. Review all paperwork to make sure all information is accurate. Follow-up at least weekly with your counselor on the status of your file (this is why it is so important to understand how to best reach them and their schedule).
If you cannot reach them, contact the NACA office. The staff may be able to access your file and give you an update. Unfortunately, my first MC quit, and our file was lost. We had to start the entire process over again with a new MC. We asked her the same questions to understand how to best work with her and she was very efficient. We were NACA Qualified, preapproved for a mortgage, about a month after she took over our file.
Once you’re NACA qualified
Once we were “NACA qualified,” we had to attend another workshop on purchasing a home. We received a qualification letter before the meeting that we were told was good for 90 days, so we attended the first workshop available so that we could get started on buying. If there is one time in your life to be 100% alert, it is at the purchasing workshop.
The workshop presenter went over the entire NACA homebuying process and he was very blunt about how difficult and time consuming the process can be. He warned that if anyone was under a tight deadline, that NACA may not work. Do not leave with any unanswered questions – I asked questions for about an hour afterwards.
Choosing your Realtor
At this point, it was time to choose a Realtor. NACA pushed hard for us to work with an in-house NACA Realtor, but we decided to work with an outside Realtor who had NACA experience. I cannot overstate how critical it is to choose a Realtor who is knowledgeable about the NACA process. Our realtor, Nicole, ended up being a lifesaver in guiding us through the process.
Once you’ve found your home
Once we found the home we wanted to purchase, we started the process of getting the house under contract. NACA is very specific in the language that must be used in the Purchase and Sales contract for your future home, which is one way that Nicole helped tremendously.
Dealing with the NACA inspection
The home inspection must be done by a NACA approved home and pest inspector, and once complete, the inspector sends the report to NACA for review. At that point, we received a list of required repairs that had to be addressed in order to purchase the home through the NACA.
This process can be difficult. The reason why NACA is so stringent is that they want to ensure that the buyer is not going to move into a home with so many issues that it puts the buyer into financial peril.
The stringent NACA home purchase criteria is part of the reason that some Realtors will talk a seller out accepting an offer from a potential buyer using NACA, which almost happened to us. Nicole understood the concerns and was able to address this privately with the seller’s Realtor. This settled her nerves and she and the seller agreed to work with us.
We worked with our Realtor to decide which repairs we would address and which repairs we wanted to ask the seller to address. A buyer has the choice to pay for repairs out of pocket or potentially wrap the cost into their mortgage. Again, I cannot overstress the importance of working with an experience Realtor. Nicole saved the deal.
Verifying that you’re still qualified
After we were approved to moved forward after the inspection, we had to be approved for NACA credit access, which verified that we were still NACA qualified. (did I mention the loads of paperwork?) Once we were approved, we completed the NACA loan application. This process went extremely quickly for us in large part of the upfront work we did:
Making the loan application easy:
- We organized all the required information in Google Docs ahead of time
- We made sure that we remained NACA qualified throughout the process
- We made a point to understand the way our housing counselor wanted to receive information
- We kept our files up-to-date with the latest account and pay information
- We quickly provided any requested documents
- We obtained an efax number to send documents that had to be faxed
- And again, we had an experienced Realtor.
Getting to the closing table
At long last, our file was transferred to a closing coordinator. I immediately contacted her and asked her the same communication preferences I asked the MC. She was very efficient. At this point the seller had finished the repairs he had agreed to and the home inspector re-inspected the house.
We also had to find a contractor for the repairs we were required to fix. To speed up the process, I choose a few contractors from the NACA approved list and luckily, they were able to provide bids on the needed work quickly. In fact, because these contractors understood the NACA process and were quick with their responses, we received our “Clear to Close” ahead of schedule!
At closing, we learned about the NACA Post Closing Program, which offers free comprehensive counseling, including financial and credit guidance, short-term financial assistance to help pay the mortgage and even assistance with a loan modification if needed. This was nice to know – they really do want to help build great neighborhoods!
Worth it in the end
The process was long and tough, but for me it was worth it in the end. We ended up with a 15 year mortgage with an .65% interest rate that easily fit into our budget. (no, that decimal is not out of place – our interest rate is really less than 1%)
Deciding if NACA is right for you
If you are interested in doing a loan with NACA, you have to have a lot of flexibility on the date you want to be a homeowner, a lot of organizational skills to balance the process, and patience not to scream as you are being asked to send in a document yet another time. Chocolate was the best coping mechanism for me. If you can make it through the process, it’s a great deal.