NACA Mortgage Product
NACA only provides one mortgage with either a 30-year or 15-year term. The mortgage terms are the following: No Down payment, No Closing Costs, No Fees, No PMI and always at a below market fixed rate. Forbes magazine in an analysis of low down payment mortgages states: “NACA is the only provider where everyone receives the same terms.”
It is the right question to ask since there is more fraud and abuse in the mortgage industry than any other industry. The reality is that as good as it sounds it is even better. This is the result of NACA’s aggressive advocacy and state-of-the-art operations. NACA has legally binding agreements with major lenders to customize mortgage lending to meet the needs of working people and those locked out of affordable homeownership. The results say it all with thousands of testimonials of how we have transformed lives.
NACA has the luxury of controlling its own destiny and is always working to improve and enhance the programs and services offered to its membership. As result, NACA provides not only America’s Best Mortgage but also one of the most streamlined processes to close loans within 28 days of the executed Purchase and Sales Contract.
The NACA mortgage is significantly better than any other mortgage including FHA, VA, Fannie Mae, Freddie Mac and conventional mortgage product. This has been verified by Promontory Financial and state regulators.
Bank of America’s is NACA’s largest and most important partner. It is important to give credit to Bank of America who has been working with NACA since 1994. NACA has about $15 Billion in this one mortgage product funded by a number of financial institution and Bank of America participates with a $10 Billion commitment. We have worked in partnership with Bank of America for 25 years starting with their CEO Hugh McColl who said “If NACA is as good as it sounds, we will be your biggest and best partner”. He was good to his word and that has continued under Bank of America’s current CEO Brian Moynihan.
NACA has about $15 Billion committed to the NACA’s Best in America Mortgage. NACA started with Fleet Bank with a $140 million commitment in 1991. The NACA Mortgage has been funded by other banks including over $4 Billion from CitiMortgage. Starting in 1994, Bank of America has been NACA’s longest and strongest partner with a growing commitment that is now $10 Billion. Bank of America is the only major financial institutions that makes loans to low-to-moderate income borrowers and holds them (i.e. does not sell to the GSEs or investors). NACA has billions more to lend.
The NACA Mortgage is the only one where there are truly no closing costs. In other mortgage products, the elimination of closing costs results in a higher interest rate or other costs. For the NACA Mortgage, the lender pays all the closing costs including appraisal, title, fees and much more, and it does not add these costs to the loan. The Member receives the same below-market fixed interest rate.
Yes. Despite there being zero closing costs, obtaining the NACA Mortgage requires a certain amount of savings or Minimum Required Funds. These include the following: earnest money deposit to secure a property (returned at closing), cost of a home inspection, pre-payment for property insurance and taxes, and reserves (one month if Payment Shock is less than $300, two months if greater than $300, and four to six months if purchasing a multi-family). These reserves provide Members with the funds to comfortably transition into their home with the necessary resources to make the utility deposits and start customizing and settling into their new home. The typical requirement depends on the area of purchase, individual budget, and the property type.
The interest rate buy-down (‘NACA Buy-Down”) is the most effective way to make a mortgage affordable or to purchase a higher priced house. For Members, interest rate buy-down is a great benefit. It is an optional use of funds from the Member, seller, grants and others at closing to permanently reduce the interest rate of the mortgage. This aggressive reduction is not available anywhere else and is an extraordinary benefit for the Member. For the 30-yr mortgage one percent of the mortgage permanently reduces the interest by one-quarter percent (i.e. 0.25%) and 15-yr reduces by one-half percent (i.e. 0.50%).
The interest rate buy-down reduces the mortgage payment and/or allows Members to qualify for a higher purchase price. It also means Members will be pre-paying a small amount of mortgage interest over the life of the loan.
Using the same amount of funds, the NACA Buy-Down reduces the mortgage payment by about three times more than reducing the mortgage amount using the same funds for principal reduction. The NACA Buy-Down should be used by homeowners who plan to stay in their home with the mortgage for at least five years.
The NACA Buy-Down is an extraordinary benefit which allows low-to-moderate income Members to permanently reduce their interest rate to virtually zero percent. We say virtually since the lowest the banks systems allow is one-eighth of one percent (i.e. 0.125%). The interest rate buy-down can be sourced from a variety of funds: The Member’s funds, grant funds, family gifted funds, and/or seller funds.
The buy-down is not restricted for Priority Members purchasing a single unit property – i.e. those members whose incomes are less than 100% of the medium income in the MSA of purchase. Non-Priority Members, or Members with income greater than 100% of the medium income in the MSA of purchase, are subject to the HOEPA high cost limit – usually around five percent of the mortgage amount. For these Members any additional funds may be applied towards principal reduction. Also, Members purchasing a multi-family are limited to the HOEPA high cost threshold regardless of their median income.
The NACA Buy-Down is unique in both in how aggressive it is and the eligible amount of buy-down. Specially, the key differences are:
- The interest rate buy-down outside of NACA reduces the interest rate by half the NACA amount (i.e. one percent of the mortgage reduces the rate by one-eighth of one percent)
- With the NACA program it is possible to buy down to almost zero percent (0.125%) –outside of NACA the buy-down is typically limited to a few points, usually only two points.
- The NACA buy-down is a permanent reduction in the overall mortgage rate and applies to the lifetime of the mortgage.
The interest rate for the NACA Mortgage is always at a below market fixed rate. It can change each day but is always about half-percent below the best conventional rate. NACA was recently included in Forbes’ lowest down-payment programs as the only provider where everyone receives the same interest rate regardless of their credit score or other circumstances.
The NACA Mortgage has one of the best performance in the lending industry. NACA has done approximately 60,000 NACA Mortgages over the past twenty years. The foreclosure rate over this period is 0.00012%. This includes the period during the mortgage crisis.
This fact destroys the myth that lending to working people with a no down payment mortgage is risky and requires a higher interest rate and fees to compensate for the perceived higher risk. NACA’s performance shows that lending to working people based on a long-term affordable payment results in one of the best performing products in the mortgage industry. Working people see homeownership as more than a financial investment. It is a family commitment where the Member will do whatever it takes to make the mortgage payment.
NACA understands the concern with major financial institutions. NACA has been in the forefront of many campaigns to protect homeowners and put an end to predatory lending practices. However, it is important to call out institutions when they are doing the right thing and to support them.
Bank of America stands out. NACA first started working with their CEO Hugh McColl in 1994. He committed $500 million to the NACA Mortgage and then, based on that success, an additional $3 Billion. Bank of America’s CEO Brian Moynihan has built on this foundation and has now upped the bank’s commitment to $10 Billion.
Bank of America’s commitment extends beyond just the mortgages to the terms and opportunities it provides to working class homeowners. They are the only major financial institution today that holds mortgages for low-to-moderate income borrowers on their balance sheet. All the others sell them and only portfolio mortgages for their wealthy customers.
Bank of America also has worked very well on environmental and other issues. They deserve NACA’s support in setting a high standard that other financial institutions need to meet.
The wealth building loan is NACA’s 15-year mortgage product. It allows Members to build wealth or equity rapidly within a 15-year period. Since so little of the mortgage payment goes to the interest, within about seven years Members will typically build up almost fifty percent equity. Thus for a $150,000 house, over $70,000 would be built in savings within this time period.
NACA uses the same criteria for the 15-year loan as it does for the standard 30-year loan, but the interest rate is about 0.50% lower than NACA’s already below market 30-year mortgage. In addition, the interest rate buy-down is twice the amount with one percent of the mortgage permanently reducing the interest rate by 0.50%. This is an incredible opportunity to build wealth quickly for those who can afford a mortgage payment that is about a third more than the payment for a 30-yr fixed.
No. There is no down payment required on a NACA Mortgage. All NACA mortgages are 100% LTV (loan-to-value). The lack of a down payment does not increase the interest rate or any other costs.
NACA generally does not currently refinance mortgages since it is best to modify an unaffordable mortgage. The NACA Home-Save Department is very effective in assisting homeowners with their servicers/lenders achieve an affordable mortgage payment.
In some circumstances NACA may refinance a land contract or lease-to-purchase loan to achieve affordable homeownership for low-to-moderate income Members.
While FHA is a good mortgage the NACA Mortgage is significantly better. FHA requires a down payment, has a higher interest rate, significant closing costs, and high mortgage insurance. With NACA there are no upfront costs or fees, no down payment, no credit score requirement, lower interest rate (including a generous buy-down option), and no monthly mortgage insurance premium (MIP). Different lenders provide an overlay that require a minimum credit score and other more restrictive underwriting criteria.
NACA does not require mortgage insurance. Mortgage insurance is paid by homeowners without providing them with any benefit. It protects the lender and even encourages the lender to foreclose sooner to reduce their risk of loss.
Nevertheless, there should be insurance to protect Members in case their circumstances change and they cannot pay their mortgage payment. Rather than through private insurance, NACA achieves this through its Membership Assistance Program (“MAP”) which includes financial assistance for struggling homeowners and other types of assistance where appropriate.
While the VA mortgage is excellent, NACA’s mortgage is still significantly better. VA loans are administered completely through Veteran’s Affairs. The VA mortgage requires closing costs, has a higher interest rate and fees, including a funding fee calculated as a percentage of the loan amount. With NACA there are no upfront costs or fees, no down payment, no credit score requirement, lower interest terms (including a generous buy-down option), and no monthly mortgage insurance premium (MIP).
NACA’s Best in American Mortgage offers only fixed interest rates below market for 15 or 30 years. ARM mortgages are designed for individuals who plans to own the property for a shorter period of time.
The NACA Mortgage has the best mortgage terms of any other mortgage. Unlike with a conventional loan, with NACA there are no upfront costs or fees, no down payment, no credit score requirement, below-market interest rate with a an aggressive buy-down option, and no monthly mortgage insurance premium (MIP). The requirements of the NACA program can be substantial since full documentation is required for NACA to verify whether a Member is ready for homeownership and what he/she can afford.
Virtually all property types are eligible including single family, multi-family up to four families, mix use, condos, co-ops and more. The details of the types are below:
- Condos – Must be 50% owner-occupancy OR have a financially sound HOA / condo association. Evaluation of the Condo association financials will be based on the ability to meet future obligations over the next twelve (12) months. A Condo Questionnaire supplied by the NACA Counselor must be completed.
- Co-ops – only available in CT, FL, MD, MA, DC, NY, NJ, IL. Other than the geography restriction, co-ops adhere to the same requirements as condos (#1 above).
- Multi-Family – Member must live in one of the units which is specified at closing. Member must have four to six months of reserves (i.e. four months for duplex, five months for three family and six months for a four family. The Member must also attend landlord/tenant training in advance to the closing.
- Mixed Use – Property must be at least 50% residential and adhere to local zoning requirements. Member must occupy the property as their principal residence. Member may own the business or lease out the commercial space.
- Manufactured / Modular Homes – must be on a solid foundation (i.e. not single wide mobile).
- Ineligible Properties – Log homes, empty lots, working farms and ranches, mobile homes and unique properties (ex. exotic materials).
Yes. The NACA Mortgage can be used to build on the Member’s own land.
It is very difficult to make this work since the Member would need to purchase with cash and would usually need to close and in a very short time.
NACA is licensed as a mortgage broker. NACA does a lot more than traditional mortgage brokers whose primary function is to submit a mortgage application. In many aspects NACA does the work as a correspondent lender since NACA underwrites and processes loans through its in-house Mortgage Department. The difference is that mortgages underwritten by NACA close in the lenders name. The current primary lender is Bank of America.
No. Construction loans are short-term interim loans to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he or she progresses.
Members may obtain permanent financing through NACA to follow a construction loan from another lender. The Member must first qualify for the desired purchase price through NACA; then they obtain a construction loan from another lender. At closing, the permanent financing obtained through NACA pays off the construction loan. A construction loan should not be necessary for NACA Members since the builder should have the resources to build, and NACA will provide the mortgage proceeds to the builder upon completion.
Yes, NACA provides a combined purchase and rehab mortgage. NACA allows Members to include the rehab amount in their NACA mortgage to address health, safety, structural and code issues. There is no limit on the amount of the rehab with the “subject-to” value – i.e. what the property will be worth after all repairs are made – not exceeding 110% of the loan-to-value.
At closing the rehab amount is put into an escrow account. NACA’s Home and Neighborhood Department (“HAND”) assists the Member throughout the renovation period. If the Member cannot live in the property because of the renovation, s/he would not have to make a mortgage payment during the first six months. The lender pays this cost for the first six months by permanently reducing the interest rate by another three-eighths of one percent (i.e.0.375%) and adding up the six months of mortgage payments to the mortgage amount.
Buy-down can come from ANY documented source including from the Member, family, government, unions, business, grants, employer or seller. The seller cannot provide a contribution greater than 10% of the purchase price.
Buy-down sourced from the seller cannot exceed 10% of the purchase price.
The interest rate is locked for the Member at time of Loan Estimate (LE). This occurs once NACA receives the executed purchase and sale contract, upon which NACA sends out the LE within three days of receipt. The interest rate is locked until closing so that the Member has time to shop around knowing that their interest rate will not change.
It is recognized that NACA provides the Best Mortgage in America. There is validity that the process can take time. Some of this is out of NACA’s control given the work some Members need to do to become NACA Qualified and the tremendous demand for NACA’s Purchase Program and mortgage. But NACA does recognize that this has been an issue and has been focused on streamlining its operations.
One of the great part about NACA is that NACA controls its own destiny. Over the last several years NACA has refined its internal organization to maximize the efficiency of its mortgage operations. Many specialist roles and positions have been identified, created and staffed. These include closing coordinators and additional staff in the mortgage department to expedite the closing and bank application process. NACA has streamlined the process in many other ways. In addition to having the best product and terms, NACA now has one of the fastest mortgage processes in the country.
No down-payment loans are often incorrectly identified as being too “risky” since the borrower has not placed up-front equity in the loan. In fact, it was the VA no-down-payment full documentation mortgage that built the white suburbs after World War 2. Minority buyers could not access this mortgage or live in those communities.
NACA has used the VA no down-payment mortgage as the foundation for the NACA Mortgage. NACA has enhanced the VA mortgage further with no closing cost, low fixed rates, aggressive buy-down, and no fees.
Both the performance of the VA and NACA mortgage over many years –including during the mortgage crisis – demonstrates the effectiveness of these mortgages. They did not cause and were not the reason for the mortgage crisis. This was because borrowers had to provide full documentation of their income and assets, had a good payment history and most importantly a fixed rate.
The no down-payment mortgage takes into account the difficulty working people have to save for a mortgage. Their risk is so much less since purchasing a home is also a personal investment not just a financial one.
NACA will not let critics limit this type of lending because they have a patronizing attitude that a down-payment is necessary for working people to be responsible homeowners.