NACA Mortgage Program Overview
Important NACA Mortgage Program Considerations
- Ability to purchase a home with no down payment or closing costs
- At or below market interest rate on mortgage
- Flexible borrower qualification guidelines including character-based borrower credit evaluation
- More in-depth and potentially time-intensive application process compared to other mortgage programs
- The program is not available in all states although availability is expanding rapidly
- Loan limits set by area
- Ongoing volunteer requirement
Key NACA Home Loan Program Terms
- Loan Purpose
- Home purchase or purchase and renovation / rehabilitation Required No Down Payment
- $0 Mortgage Program
- Fixed rate mortgage Mortgage Term
- 15 or 30 year Interest Rate
- At or below current market rates Interest Rate Buy-Down
- Borrower has the option to buy-down the interest rate to 0% by increasing the mortgage amount, paying out of pocket or using gifts / grants Closing Costs
- $0 Application Fee
- $0 Points and Other Fees
- $0 Minimum Credit Score
- None / character-based borrower credit evaluation Pre-Payment Penalty?
- No Balloon Payment
- No Maximum Income Level
- Must be located in an area where NACA is licensed. NACA has approximately 50 offices across the U.S. and is also licensed in several states in which it does not have an office.
NACA offers an interactive map of its locations and you can contact NACA to determine if the program is offered in your state.
There is no maximum property value (purchase price plus cost of any repairs) for borrowers whose gross income is less than 100% of the median income for the metropolitan statistical area (MSA) where the property is located or if the property is located in a “targeted area.” A targeted area is a census track where the median income is less than 100% of the median income for the MSA in which the census track is located.
Please note that although there is no maximum property value for borrowers whose income is less than 100% of the median income for an MSA or if the property is located in a targeted area, all borrowers are bound by the conforming loan limit of their specific region.
- The borrower cannot own another property before closing on NACA mortgage
- The borrower must reside in the property being financed and purchased. (Owner Occupancy Agreement)
- Borrowers are required to volunteer at three housing advocacy events per year
- Examples of volunteer activities include demonstrations, preparing mailers or other housing advocacy events, or donating food to local charity.
A mortgage program with below-market mortgage rates, no down payment requirement and no closing costs may sound too good to be true so it is important to highlight the program’s unique qualification requirements.
Program participants must adhere to the NACA mortgage application and home purchase process which can be more time consuming and information-intensive than the standard mortgage process. The NACA process requires that borrowers provide a budget for the past three to six months, a debt payment and cash flow history and borrowers must show income stability. Borrowers must also provide full documentation of income, assets and debt including 90 days of bank statements (self-employed borrowers must provide twelve months of bank statements).
NACA Program Timeline
Because of its requirements, you may be concerned that the NACA application process puts borrowers at a disadvantage when buying a home. Home sellers typically prefer buyers that move fast and place fewer conditions and contingencies on an offer. NACA has implemented several steps to address these concerns and make sure that the application process does hinder your ability to buy a home. According to NACA, once a home purchase agreement has been submitted, most closings take place within 28 days. However 28 days is nearly impossible. 45-60 days would be more accurate.
This helps to mitigate potential concerns from home sellers that it takes longer for NACA members to complete the mortgage and purchase process.
In addition, the organization offers “Achieve the Dream” events which combine the first four steps of the NACA process (workshop, document submission, counseling and underwriting review) into a single event where applicants can be approved for the program in as little as one day.
Key NACA Qualification Requirements
The NACA Program is well-suited for borrowers with low credit scores or limited credit histories. Instead of solely relying on your credit report and score, NACA applies a rigorous character-based approach to determine a borrower’s credit-worthiness. For example, a borrower is not penalized if he or she experienced financial hardship due to high medical expenses caused by an illness.
Borrowers must demonstrate the ability to afford their total monthly housing expense which includes your mortgage payment plus property tax, homeowners insurance and homeowner association fees, if applicable. NACA compares borrowers’ monthly income and debt (including credit card, student and auto loans and alimony payments) to their total monthly housing expense to determined their ability to qualify for a mortgage and participate in the program.
Borrowers’ financial situations including their monthly income, debt and savings cannot fluctuate significantly during the application process and after their mortgage closes. Borrowers may also be required to provide cancelled rent checks during the application process. We summarize the NACA mortgage application and home buying process below and you can find more detailed information on the NACA web site.
NACA Mortgage Application and Home Buying Process Steps
|1) Attend a Home Buyer Workshop||All applicants must attend a free educational home buyer workshop|
|2) Attend a Housing Counseling Class||Meet with a housing counselor one or multiple times to determine your ability to qualify for a NACA mortgage|
|3) Review Mortgage Options and NACA Program||Review the mortgage programs available through the NACA program|
|4) Housing Search||Attend a NACA Purchase Workshop that review the home purchase process
Work with a real estate agent to find a home you can afford
|5) Purchase and Sale Contract||Negotiate and execute the purchase and sale contract for the property you want to buy
Your NACA counselor must review the contract including your mortgage amount
|6) Property Condition||The property you want to buy must be inspected by a NACA-approved home and/or pest inspectorSignificant property issues such as structural damage may need to be fixed before the mortgage closes|
|7) NACA Credit Access and Lender Application||Receive NACA credit access from your NACA mortgage consultant and submit your mortgage application to a participating lender|
|8) Mortgage Processing and Underwriting||NACA works with your lender to ensure that the mortgage application review and underwriting process goes smoothly|
|9) Mortgage Closing||Sign all the necessary documents to close your mortgage and take ownership of the propertyDo not sign mortgage documents unless you are completely satisfied with the terms of your mortgage|
|10) Post-Purchase Program||NACA provides a post-purchase program to assist borrowers with any mortgage challenges they encounter after their mortgage closes|