NACA Median Household Incomes – Conforming Loan Limits HOEPA Act DC, Maryland & Virginia

Here’s the deal. I’ll try and break this down as simple as possible. Fun fact: I actually bought my home through the program in 2015, and I met my fiance through the program in 2016. (Two stories for another day). I apologize for the long detailed post in advance.

As a very strong advocate of the NACA Program, I consistency volunteer at NACA events (including this weekends Achieve The Dream event in Baltimore MD) .I offer my audiences a candid peek into my own personal life experience to home ownership, and provide motivation and encouragement. By developing relationships with NACA counselors, departments heads, and regional program managers over the last decade, my team has guided many clients through the program successfully.

People seeking to go through the program are either classified as “Priority” or “Non Priority” Members.

Priority members = Your yearly income is under that of the median household income in your area.

Non Priority members = Your yearly income is higher than the median household income in your area.

Here is where you will find 2018(2019 not available yet)median household incomes for all areas throughout the US: https://www.ffiec.gov/pdf/msa18inc.pdf

Here are the only ones relevant to DC, Maryland & Northern Virginia:

BALTIMORE-COLUMBIA-TOWSON, MD $94900

WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA-MD-WV $114900

SILVER SPRING-FREDERICK-ROCKVILLE, MD $118700

If you are a priority member, there are no restricted purchasing areas. You just need to stay within the qualified amount (PITI). While there are no income minimum’s or maximums to qualify for the NACA mortgage, the program is primarily focused on assisting low to moderate income families.

If you are a non priority member, you must buy within an area that falls under 100% of the tract median income.

The tract median income may be found by visiting here & enterting in the address, switch to 2018: https://geomap.ffiec.gov/FFIECGeocMap/GeocodeMap1.aspx

Previously NACA used to have max purchase prices for certain cities across our area, now they go by conforming loan limits. Below I will post conforming loan limits:

DC: http://no-downpayment.com/2019/07/25/naca-conformi…-limits-for-washington-dc-2019/

Maryland: http://no-downpayment.com/2019/07/25/naca-conformi…-loan-limits-for-maryland-2019/

Virginia: http://no-downpayment.com/2019/07/25/naca-conformi…-loan-limits-for-virginia-2019/

In the major areas the new conforming loan limit is $726,525. This essentially replaces the max purchase price. Check the list to see which city you are interested in.

So that’s it regarding purchasing areas/conforming loan limits. Let’s move to interest rate buy down. Arguably the best feature of going through the NACA program. NACA’s interest rate is always at least .25% below market. By utilizing buy down, one can achieve a final interest rate of .125% 15 or 30 years fixed, through Bank Of America. Buy down is 100% choice. I have helped several clients obtain this low interest rate. I’ll explain.

30 year loan = 1 point = 1% of the loan amount reduces the interest rate by .25%

15 year loan = 1 point = 1% of the loan amount reduces the interest rate by .5%

Right now, the NACA 30 year rate is 3.375%, the 15 year is 2.875%

Simply put, you are approved for a specific monthly payment amount, which translates to a maximum mortgage amount based in part on the current interest rate. When you reduce the interest rate, the amount of money going to interest is less at the same payment amount. That means more of the payment can go toward principal, which in turn means a higher maximum mortgage amount, or a far lower monthly payment, or a combination of both.

Most people tend to go with the 30 year loan, as the payments are much more reasonable, especially with house prices so high in the DMV. However, the 15 year mortgage truly is an unbelievable option. It requires less than 6 points paid on interest rate to obtain a .125% fixed rate(the lowest rate possible). On a 400k home, thats only 24k up front to essentially have a 0% interest rate on a mortgage. On a conventional loan, one would pay 24k interest within the first 2 years or so, especially if that conventional loan had PMI (NACA has no PMI). Anyways im getting a little ahead of myself here…

So one would need to buy down approximately 13.5~ points with the 30 year loan, and 5.75~ points with the 15 year loan, as the 15 year loan buys down twice as much.

Members can buy down up to 7 points with their own money.(This money goes to the bank as a fee) Sellers & builders can provide up to 10 points. If you are a priority member, you are eligible to receive the lender matching grant. Non-priority is not eligible. Anytime you receive closing money from a seller or builder, that money can be used toward your interest rate buy down.(remember NACA pays all closing costs). I routinely negotiate with builders in the 10-15k range for closing cost help which easily reduces the interest rate anywhere from .5%-1.5%, without a single cent from the member.

For priority members, any amount brought to the table after the first 7 points have been paid will go to the principle balance of your loan, and the lender will match that dollar for dollar in further reducing the interest rate. non-priority members are not eligible for this.

Example:

The Member is contracted to purchase a house for $400,000. The starting interest rate is 3.5%. There is no escrow for repairs. The Member wants to put $32,000 to interest rate buy down and is at 75% of the median income.

For a 30 year loan, $32,000 buys the rate from 3.5% to 1.5%

Seven points ($28,000) from the Member can go to interest rate reduction. The eighth point ($4,000) goes to principal reduction, and the lender contributes a matching $4000 toward interest rate reduction. The loan amount will be $396,000 with an interest rate of 1.5%.

If in the same example, the Member was over 100% of the median income, the same $32,000 would result in a loan amount of $396,000 but no lender grant match to further reduce the interest rate so the final interest rate is 1.75%.

For a 15 year loan, the rate only needs to be bought down less than 6 points. So it wouldn’t matter if you are a priority or non priority member, you could buy the rate down by yourself.

Ok, so I know that is a lot of information to take in. Now ill answer how long it took me to get through the program. 7 months. 3 to qualify, 2 to find the home, and 2 to close.

Here are my loan details:

Purchase Price: 405k
Loan Amount: 383k
Total Mortgage Payment: $1474
Principle & Interest: $1074
Property Taxes & Insurance: $400~

As of August 2019, my original loan balance has decreased from 383k to 330k in 4~ years. The rapid equity is absolutely amazing.

Here are a couple of tips to get though the program easier:

Tips to be successful through the NACA program quicker:

-Choose an NACA approved realtor to assist you with your purchase.
-You must be extremely patient, persistent, and determined.
-Gather all documents as soon as possible and keep them organized.
-Avoid withdrawing cash from ATM’s.
-No late payments(Must have 1 year record of all payments on time).
-Strong rental history.
-Solid employment(2+ years recommended).
-Always do what the counselor asks for, as soon as possible.
-Do not make any large purchases, especially with credit.(buying new car, appliances, furniture, personal loans etc- always consult your counselor).
-Clean up your last 2 years credit history(if needed).
-Be completely honest about your financial situation during intake meeting.
-Never miss a scheduled appointment with your counselor.
-Scan documents into PDF files for ease of return access to them if necessary.

I hope this genuinely helps you! Feel free to ask me any questions.

I can be reached by email at kris@no-downpayment.com

Kristopher Fraley , Realtor

A few years ago a serendipitous event(purchasing a home through the NACA program with a 0% 30 year fixed interest rate) inspired me to become a licensed NACA approved real estate agent in the DC, Maryland & Virginia area, and I love it! There is nothing greater than giving back and its a fantastic process that I feel lucky to participate in. With so many money hungry sharks preying on innocent people in the real estate industry, I feel honored when people trust my team to help them obtain the best terms on a mortgage possible. I can be reached by emailing kris@no-downpayment.com