NACA is a controversial organization that many turn to in times of need. The name stands for the Neighborhood Assistance Corporation of America. Their mission is to fight predatory lending practices and go up against big banks. Meanwhile, they work with homeowners who may be facing foreclosure. And, their assistance also extends to homebuyers who need help finding a fair loan. If you’re looking to purchase a home, understanding the help that NACA can provide is important.
What Is NACA?
The Neighborhood Assistance Corporation of America is by no means a new organization. In fact, they have been around since 1988. However, during the recent housing bubble that the NACA name began standing out.
During the housing bubble, NACA staged multiple protests. These protests took place outside of the homes and offices of CEOs. They were protesting the people in charge of some of the country’s biggest banks.
With many homeowners upside down on their loans, their goal was to make banks modify these mortgages. NACA made headlines for the effort. Many supported them while others frowned upon their aggressive tactics.
Ultimately, NACA’s work was able to shame lenders into putting millions of dollars on the table. Many banks gave in and worked to restructure their loans. This resulted in interest rates getting a cut drastically.
NACA says they targeted predatory loans that weren’t fair to begin with. Today, they also work to guide new home buyers to loan programs so they don’t fall victim to unfair practices.
As a non-profit group, NACA works on many levels to advocate for borrowers and promote homeownership. They seek to build healthy neighborhoods in both rural and urban areas across the country. Their workshops and programs help borrowers with poor credit avoid predatory lenders.
They operate a homeownership program aimed at “at-risk” borrowers. These are the people most likely to fall victim to the subprime lending industry. Usually, this is a result of poor credit which limits the borrower’s access to low-interest rates.
Instead, such borrowers usually find themselves getting an unfair loan. Aside from a high interest rate, predatory programs can also have unfair repayment schedules and penalties. They are also known for allowing risky borrowers to borrow more than they can afford. This ultimately leads to them defaulting.
NACA believes that helping every borrower get a low interest rate promotes financial health. By having a fair mortgage that they can afford, a borrower becomes part of a strong community. They are able to afford to own a home and, ultimately, become a prime borrower.For those currently in a loan program that has a high interest rate, NACA can help get the terms modified. With this effort, a homeowner can go from at risk of defaulting to being able to actually afford their own home. Fair terms put the opportunity for homeownership in front of more borrowers.
While NACA advocates on behalf of all homeowners in the country, their programs target borrowers with poor credit. Their work centers around helping borrowers avoid predatory lending practices through education and flexible loan programs.
However, whether you have good credit or bad credit, NACA promises everyone the same great terms.
“America’s Best Mortgage Program”
NACA has their own mortgage program, and it comes with many perks. To qualify, you’ll need to obtain a NACA membership by enrolling on one of their mortgage courses. It’s a completely free process and the class takes about four hours to complete.
The first benefit that piques people’s interest about the program is the down payment, or lack thereof. NACA’s mortgage program requires no down payment at all. Meanwhile, a conventional mortgage requires up to 20% down. On a $100,000 home, that would mean a borrower needs $20,000 cash to purchase. Other programs, such as the FHA program, require 3.5% down. This can still cost a borrower thousands of dollars in savings that they simply can’t pay.
One consideration here is that, usually, a borrower will have to pay Private Mortgage Insurance (PMI) if they put less than 20% down. However, the NACA program does not have PMI. This means you will not have to factor this cost into your monthly payment.
Another benefit of the NACA program is a surprising one: no closing costs. While other no down payment programs exist (such as USDA and VA home loans), a no closing cost program is hard to find. With no down payment and no closing costs, a borrower will literally pay $0 out-of-pocket.
Usually, closing costs are at least 1.5% to 3% of the home’s cost. This means the program will save you a minimum of $1,500 on a $100,000 home purchase for closing costs alone.
Add to this NACA’s no-fee promise and you will save even more money. This means there is no origination fee. There is no application fee. There is no underwriting fee. There is no document fee. There aren’t even any processing fees.
To top it all off, based on NACA’s mission, this program does not require perfect credit. The interest rate is below the market rate as well, in order to help more people afford their own home.
Most impressive of all, there are no income limits. While how much you earn will determine how much you can borrow, their is no “cap” on your earnings. This is a feature worth noting since other no down payment programs, like USDA home loans, limit household income. The result is that other programs are only available to the lower and lower-middle class.
Reading through these features, it’s easy to see that the NACA program is much more flexible than others out there. It also has more perks than any other program you’ll likely find. This most likely has you asking, what’s the catch? There are some requirements you’ll have to meet in order to use the program.
Home Buying Requirements
NACA guides borrowers through the home buying process from beginning to end. They advertise that their program takes 10 steps to go from beginner to happy homeowner.
Step #1: The Workshop
The first step requires you to signup for a NACA workshop. The workshop is completely free. It lasts for four hours and teaches about the NACA program. Whether you’re looking to buy a home or refinance, the workshop will answer all of your questions. You cannot go through the program unless you attend the workshop.
Unfortunately, this is where many borrowers hit a wall. The NACA workshop is an in-person event. This means you need to attend one locally. You can search for a workshop near you on the website, but the workshops mostly occur in larger cities.
Every month, NACA holds at least two workshops for each of their office locations. Typically, 100 to 600 people attend the workshops. They are always on a Saturday and feature testimonials from others who have used the program.
Step #2: Counseling
After attending the workshop, you are ready to participate in the NACA home counseling session. The first meeting will give you the chance to ask any questions you have about the program. Your Housing Counselor will work with you to ready you for home ownership. The meeting will review your current income and debt to determine if you are ready to own a home.
By looking at a comprehensive budget, they will help you with the next steps for financial readiness. If they determine that you’re ready to own a home, they will determine the mortgage payment you can afford. This will determine how much you can borrow through the program. They will work with you to reduce your expenses and maximize the amount you can afford.
Your action plan will lay out what you need to do to be financially ready to own a home. Counseling may continue for weeks or months, depending on what needs to happen. After you have completed the action plan, you will be able to become NACA Qualified.
Step #3: Mortgage Options
Once you have completed counseling, you are financially ready to buy a home. Now, you will sit down to look at all of your mortgage options. This includes the potential of a NACA mortgage. If you wish to pursue a NACA mortgage, this is when you will become NACA Qualified.
As a NACA Qualified Borrower, you must continue to keep your finances on track. You will have to save the difference between your current housing payment and your predicted affordable mortgage payment every month. You’ll also need to submit documents, like pay stubs.
Step #4: The Home Search
After selecting the mortgage product that you would like to pursue, you will get to begin the home search. This is when you look to find a home in the area that fits your budget and your needs.
This step requires you to identify the properties you like. You then must address any repairs and issues. If NACA approves the home, you can obtain Credit Access Approval to ensure you can afford it. You then submit your NACA Mortgage application.
Step #5: Purchase Agreement
NACA will either approve or deny your mortgage application. If they approve it, you will be ready to sign the Purchase and Sale agreement. This is a contract that legally binds you (the buyer) with the current homeowner (the seller).
Without the P&S, they could sell the home to someone else. The contract stops others from buying the home while you try to secure financing to purchase it. However, the house isn’t yours just yet.
Step #6: Property Inspection
After the P&S gets signed, NACA will need to inspect the property thoroughly. This keeps you safe from buying a home that has severe structural issues and other problems. While NACA may approve a home that needs repairs, they will only do so based on affordability. If you cannot afford to make repairs, they will not approve the property.
Step #7: Mortgage Approval
Steps five, six, and seven fill all happen rather quickly. Once the home is under a Purchase and Sale agreement, you and your Mortgage Consultant will work fast to get your financing approved. Without approval, you will not be able to purchase the home.
Step #8: Mortgage Processing
This is when all of your income and expenses are re-verified. So long as you have stuck with the plan of action identified during counseling, you should qualify without issue. However, if your income has decreased or your expenses have gone up, you may not.
Step #9: Mortgage Closing
This is nearing the end of the process when you finally get to close on your home. This is when you will get informed of any costs that you have to pay at closing. While NACA has no fees, you may have to pay taxes and/or insurance for the home at this time.
Step #10: Post-Purchase Program
NACA aims to encourage successful homeownership. That’s why you will take part in the post-purchase program to keep your finances on track. This program will support you in your new journey of home ownership.
Take The First Step
The NACA program definitely requires some legwork to get into, but if you can manage it, the benefits are well worth it. There is no other national program that offers the features of the NACA mortgage. No down payment, no closing costs, and no fees are just the tip of the iceberg.
While the ten steps to owning a home through NACA can seem daunting, each step is important in preparing you for successful home ownership. Are you ready to take the next step? Reach out to a Peak Properties broker and discuss your options for buying a home through this incredible program. Contact us to start your journey to home ownership.