Ok. So by now im sure you have already read about the main benefits of the NACA program. Just in case, here they are again:
The NACA program offers: No down payment required, no closing costs, no private mortgage insurance, no credit score check, below market interest rate as low as 0.0625% 30 years fixed. The max purchase price in the DC/MD/VA metropolitan area is 669k, though your individual qualification will vary. NO INVESTORS, Cannot currently own any property, Owner occupancy(must live in home), there is no income minimum, or maximum, no restricted purchasing areas, lender pays appraisal, and absolutely no bogus fees!
So, down payment vs buy down, which gives you the lowest monthly payment, and the most interest savings? Lets do the math. The math does not lie.
In this example, we are going to use the following numbers to compare monthly payments and interest savings:
Amount you have saved for your home purchase: $18,000
Purchase Price: $300,000
First, lets start with The NACA loan. No down payment. What does this mean? It means 100% financing. You don’t have to put a dime for down payment. You immediately start taking advantage of the powerful impact of the BUY DOWN with your funds if you choose.
So we have already informed you that 1% of the LOAN amount reduces the interest rate by .25%. So in this example, 1 point = $3,000. 2 points= $6,000, which is .25 and .5% off the interest rate respectively.
Your $18,000 can buy the interest rate down 6 points, or 1.5% off the interest rate.
What does this monthly payment look like?
Right now the NACA interest rate for the 30 year loan = 3.75%. Subtract 1.5% from 3.75% and you end up with 2.25%.
The total monthly payment for this example at a 2.25% interest rate = $1506.74(including taxes, insurance & HOA)
The P & I payment(Principle & Interest)= $1,146.74, of which on the 1st monthly payment made $584.24 goes to principle(equity) and $562.50 goes to interest. Woah! You have a 30 year loan where your FIRST payment is more equity VS interest.
Total interest over 30 years: $112,825.79(Plus your 18k buy down upfront)= $130,825.79
Ok, now lets slow down. Lets show you the same numbers where instead of buying the interest rate down, you are forced to put down a down payment. (Booooo!)
Not to mention any lender outside of the NACA purchase program’s interest rate is ALWAYS going to be starting .25-.5% higher. But lets just assume its the same starting rate which is 3.75%
So loan amount is $282,000 with no buy down.
Here is the monthly payment: $1,665.99
Here is the P & I payment: $1,305.99
Your first months principle payment is: $424.74.
First months interest is $881.25
You see how your paying TWICE the amount in interest as principle in just the FIRST month?
Total interest over 30 years: $188,154.95
So lets recap. Using the EXACT same $18,000, just differently USED.
NACA loan saves you $159.25 a month on your payment.
NACA instantly starts you off at higher equity vs interest in your payment.
The NACA loan saves you $57,329.16 in interest over 30 years.