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The NACA Program
The Neighborhood Assistance Corporation of America (NACA) was built for individuals with limited assets and/or bad credit. The NACA program is a nonprofit homeownership and advocacy organization that is designed to assist homebuyers challenged with the credit and initial capital needed to buy a home. NACA offers attractive loans below market interest rates without down payment or closing costs requirements.
This discussion will cover:
- What The NACA Program Is
- Qualification Requirements
- Steps to Getting Started on the NACA Program
Let’s get started.
What is NACA?
NACA is a purchase program that educates buyers and helps facilitate affordable financing.
Benefits of NACA
The NACA program provides first time buyers with the ability to mitigate:
- Down payments
- Additional points/fees
- Closing costs
- Market/above market interest rates
- Credit score requirements
Interest Rates
The NACA program provides highly competitive mortgage rates and their current rates can be found here. As of September 2021, their terms look as follows:
| For low-to-moderate income borrowers | |
| 15-year term | 1.375% APR |
| 30-year term | 1.875% APR |
| For higher income borrowers | |
| 15-year term | 2.375% APR |
| 30-year term | 2.875% APR |
*APR’s are subject to change with market conditions
As we break down interest rates, it’s important to note that the NACA program simply facilitates the lending and doesn’t directly provide the loan. Rather, they’ll refer you directly to a participating lender in their program.
On a conventional loan, private mortgage insurance (PMI) is typically required if you’re putting less than 20% of the home’s value down as a down payment. With the NACA program, the Membership Assistance Program (MAP) takes the place of PMI and guarantees the loan in the case of defaulting.
Lastly, the MAP program assists homeowners with budgeting and planning so that they can make smart financial decisions that set them up for a more financially stable future.
NACA Requirements
Now it’s time to find out who qualifies for the NACA program.
Potential homebuyers with a household income that falls below the median household income in their area can buy a property anywhere within that given area under the NACA program. Whereas potential homebuyers with higher incomes than the area median are only allowed to buy a home in areas that are designated “priority areas”.
One of the major appeals of the NACA program is that those with lower credit have an easier time qualifying for lending. While traditional mortgages look at your credit score, the NACA program looks at other factors such as:
- On time payment history
- The home that you close on must be your sole property
- You are required to live in the home
- An annual membership fee of $25 is required to be a NACA member
- You’ll participate in at least 5 activities per year that could include:
- Volunteering in a NACA office
- Joining an advocacy program
- Participating in a lender committee
- Help other members through their home buying journey
- You cannot buy a home that exceeds the local loan limits for a conventional mortgage (your realtor will be able to walk you through this)
While the NACA program is a great alternative to conventional loans for lower income buyers, it’s important to be aware of the requirements that come along with the program.
Steps to Getting a NACA Mortgage
Now that you have a better understanding as to what the NACA program entails, let’s get into how to get started if you’ve determined it’s a fit for you.
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Attend a workshop
The first step in getting started is to attend a free homeownership workshop. These are hosted on a per area basis so look for one that’s local to you. This will provide further detail such as the total costs and qualifications.
Search for a local workshop directly on NACA’s website.
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Meet a counselor
Once the workshop is complete, you’ll need to meet with a housing counselor to determine your budget; Much like how you’d go through the pre-qualification process on a conventional loan.
The counselor will give you steps to become more financially secure and check in frequently. If daunting at first, they’re there to help you each step of the way.
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Maintenance mode
You’ll then become NACA-certified and should continue to build your credit. During this timeframe you’ll continue to pay bills, avoid any new credit inquiries (credit cards, auto loans, etc.), and continue to generate income so that you can put money away for your home while being able showing bank statements later on.
*this portion consists of a 90-day window
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Attend a purchase workshop
Time for another workshop. In this workshop, you’ll work with the counselor to identify properties that fall within your price range and be connected with a real estate professional that participates with the NACA program.
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Qualification and purchase contract submission
Once you’ve identified the home that you’re interested in purchasing, your counselor and real estate agent will assist in getting you a qualification letter. Additionally, you’ll work together to get an offer drafted on the home.
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Inspection
Much like your typical home buying process, you’ll get the home inspected with a NACA participating inspector to ensure there aren’t any issues that need to be addressed before moving into the home.
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Submit loan information
You’ll now need to submit the documentation required in order to officially qualify. This complements step 3 because you’ll now have to submit pay stub history, bank statements, and proof of on-time payments to show that you’ve been in good financial standing.
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Closing time
Once the mortgage is processed, you’ll meet with the seller, their attorney, and your attorney/agent to sign all mortgage documents and finalize your home purchase.
Congrats, you did it!
Things to keep in mind
The NACA program provides flexibility for potential homebuyers that would be otherwise restricted from becoming a homeowner.
Some of the pros include no minimum credit score, low interest rates, no PMI, and counseling along the way.
Some of the cons include you must live in a NACA area, plenty of ongoing maintenance with the NACA office, and purchase limits on homes.
Be sure to work with your real estate agent to determine if this is the best option for you.
One of the best ways to better understand this program is to start by attending a first time homebuyer seminar.
