What is a Down Payment on a home?
It is commonly accepted that you must have a down payment to buy a home. While this is false, lets get back to the basics of what a down payment actually is. A down payment is something you pay a seller. You then take out a mortgage loan for the remaining balance through a lender(bank).
You may hear people speak about putting a 3.5% down payment, 10% down payment, or even 20% down payment. All this means is if you buy a home for 100k, a 3.5% down payment is $3500, 10% is 10k, and 20% is 20k. Traditionally you “lower your risk” as a buyer when you come to the table with a down payment. These days, you are required to come to the table with a down payment as very few programs exist offering no down payments. The other programs usually get your money one way or another in other fees such as closing costs, private mortgage insurance, etc. Not with the NACA loan. You pay none of that.
No down payment loans in the past:
Back in 2006 and 2007, you could easily obtain 100 percent financing from nearly any bank or lender in town, with the most common the 80/20 combo loan, which is a first mortgage for 80 percent of the purchase price and a second mortgage for the remaining 20 percent.
These high-risk financing deals were rampant, and most homeowners took the bait and chose not to put any money down, assuming their home would appreciate endlessly. This explains why millions of American homeowners are now underwater on their mortgages and/or facing foreclosure.
And that’s pretty much why the days of no money down mortgages came to an end, with lenders quickly upping credit score and documentation requirements, while slashing maximum loan-to-value ratios.
10-20% down to avoid private mortgage insurance:
There are a number of people who believe you must put down 10-20% down payment to avoid what is called private mortgage insurance. This is insurance you take out for to cover the lenders potential losses if you default on your mortgage loan. In other words, it does not work toward your benefit, unless you plan on defaulting on your mortgage.
All NACA loans come with no private mortgage insurance, and do not sneak in “other fees” anywhere else in the loan. Many lenders will claim to have no private mortgage insurance, however will require a down payment, and will “cover” private mortgage insurance only by slightly raising your interest rate, so you still pay for it.
The only modern “no down payment” required loan worth while:
So what options do potential homeowners have nowadays when it comes to a mortgage with no money down? Amazingly, the NACA has been around the whole time offering no down payment mortgages, along with no private mortgage insurance, no closing costs, no perfect credit, & the ability to buy your interest rate down, potentially as low as 0.0625%(the lowest allowed by law) Who backs this mortgage? Citi Mortgage with an exclusive deal with the NACA program. It is the best mortgage in america, aka “the best kept secret”
That’s right folks.You have likely never heard of the NACA program as they do no advertising what-so-ever. It is merely a peer to peer, word of mouth program.
Why is it so valuable to NOT put a down payment down through my NACA loan?
The main benefit to not being forced to come to the table with no down payment is of course you get to KEEP your money NOW! Who wouldn’t want that?
However, majority of the people who go through the NACA program, decide to put their money toward what is called “interest rate buy down” where you buy the interest rate down on the loan you are about to take out. While it is known that we are currently in times where interest rates are at all time lows, 3-4% is still not as low as you may think on a loan for hundreds of thousands of dollars over 15 or 30 years.
The NACA loans starting interest rate is already always below market by at least .25-.5%. Utilizing the interest rate buy down with your money instead of a down payment, paying closing costs, or that ridiculous private mortgage insurance yields far far more value!
Here you can view an example of the difference in your monthly payments savings by using 18k toward interest rate buydown with the NACA program VS putting a 18k down payment on a traditional loan.
The NACA loan sounds too good to be true, “there must be a catch”
While all of the benefits of the NACA program are completely true, the loan is not for everybody. For instance, you cannot obtain a NACA mortgage loan if you currently have any ownership in any property. You also cannot obtain a NACA loan higher than 669k in the DC/MD/VA metropolitan area. You have to abide by your qualification amount, which will be determined once you start the process. The program is not for investors, it caters toward first time home buyers, however this does not necessarily need to be your first home. The program has a strict qualification process, that can range from 1-12+ months depending on your individual circumstances.
The program is not 1-2-3 quick fast. It takes about the same time as an FHA loan, likely a little longer. You will likely get frustrated with the process, however the benefits offered cannot be found anywhere in the industry. Nothing on the market can compare to the NACA loan.