Minimum Required Funds (“MRF”) are funds the NACA Member must have available to pay costs associated with the property purchase, pre-paids at closing and a reserve for costs once you close.
The MRF is much lower for the NACA Mortgage than any other mortgage since the lender pays thousands of dollars in closing costs and there is no down payment requirement. The property acquisition costs consist of earnest money & inspection fee. Earnest money is required by the seller as a deposit to hold the property until inspections can be completed and the loan application is approved.
Upon closing, the earnest money will be applied toward the required pre-paids. Pre-paids are a one-time payment for future costs that you will need to bring to your closing. These costs include the first year’s homeowner’s insurance premium, mortgage interest from the day you close until the end of the month, property taxes and homeowner’s insurance escrows.
The lender requires these to be paid up-front but your future mortgage payments will include the monthly fees for the property taxes and homeowners insurance going forward. The lender keeps your fees in an escrow account and pays them for you. Since these fees change over time, you receive a credit if the lender collects too much, or you may be charged additional amounts if there are insufficient funds. MRF is typically in the 2-5k range or so