In this final installment of my experience with NACA (the Neighborhood Assistance Corporation of America), I will review the steps I went through after our mortgage counseling.
After many months of budgeting, planning, taking care of open credit report issues, ensuring all bills were paid on time, and most importantly, saving – my husband and I were finally able to say we had checked off all of the “to-do’s” on our action plan.
This. Was. Not. Easy.
It was WORK to budget and stick to that budget. It was WORK to make sure all of our bills were paid on time and that the right amount of money was going into our savings account monthly. It was WORK to negotiate with creditors or have errors on our credit report corrected. Although this was a lot of work, it brought about a growth, maturity, and unity in my relationship with my fiancé. We were working diligently to ensure that we had a solid start to our marriage and a solid foundation to grow upon.
The application process was a few weeks of stress and panic. We had to make sure all documents in our file were up-to-date. As previously mentioned, one of the standout differences of the NACA program was that they underwrite upfront for an APPROVAL, not a pre-approval which is standard with many conventional and FHA loans. At the time of our application, it was a bit of a hectic time as the bank that backed the loans for NACA was being transitioned from one institution to another.
We signed a STACK of forms. No sarcasm. A STACK… I should have hugged a tree as I left the office since a tree gave its life just for us to have a STACK of mortgage application forms to sign.
We followed up frequently. (Don’t be THAT person that follows up every two hours. Be reasonable.) We QUICKLY submitted documentation that was requested of us. It was nerve-wrecking. Let’s be honest. You are being judged. Not only are you being judged, it is by someone you have never met or seen before and you don’t have an opportunity to explain, encourage, or separate yourself from the crowd. Yet, when that approval comes in… It is OH… SO… SWEET. You feel as if you have overcome a major hurdle. You finally have a sheet of paper with your name and a bank’s name on it, and that sheet of paper says that bank will back you for a mortgage.
NACA requires that the realtors used for the house hunting process take a course and be registered with NACA, as the realtor needs to be familiar with the restraints and style of mortgage provided by NACA. We requested a realtor we had met at a NACA event and hit the ground running.
House hunting is NOT easy in South Florida, especially when you are on a budget. I will not bore you with the details, but I will give you the facts that you need to know…
- NACA allows you to use 10% of your mortgage amount for repairs/upgrades to a home (so long as that additional 10% falls within your approved mortgage amount).
- NACA does not allow you to incentivize a buyer on your offer. You can’t say, “Hey… we’ll pay you an additional 1% in cash at closing.”
- Most importantly, NACA does not allow you to take out a mortgage above the appraisal amount. This is logical, but since NACA doesn’t let you pay (even out of pocket) above the appraisal amount this becomes an issue, especially in hot real estate markets where most people offer above asking price.
Here is what happened with my fiancé and me: We made an offer on a home of approximately $260,000, and the owner accepted that amount. We went through the inspection of the home (which was passed with flying colors), and then we moved on to the appraisal.
That is when everything basically fell apart. It was the downfall of the process. When the appraisal came in, the house appraised for approximately $235,000. NACA would only approve a mortgage for the $235,000 appraised amount. The $25,000 difference was too great of an amount for us to negotiate down or come to an acceptable agreement with the seller. The seller was adamant on selling for $260,000.
My fiancé and I had to walk away from purchasing a home about a week before we would have closed. It was also the week of my fiancé’s birthday. It was also exactly 4 months before our wedding. For approximately 2-3 weeks, we were about as depressed as you could get.
The fault in my situation is that NACA should not be used in hot real estate markets where buyers are a plenty and sellers are scarce. In our market, it is very common for homes to go for slightly above appraisal. Additionally, NACA’s appraisal dispute department was a nightmare to deal with. We had an extensive list of comparable homes that reflected the home was worth more than $230,000, yet they were not trying to find a way to help a customer who has worked so hard and had also referred several friends to the program.
There are certain neighborhoods where sellers outnumber the buyers. In THOSE markets, I’m sure NACA is most effective. The buyer can set the terms with the sellers.
I’m sad to say that my fiancé and I were not able to buy a home. Because it was so close to our wedding, we had to rush to find a place to rent. A year later, we are still renting. It’s a vicious cycle, yet we are already preparing ourselves to buy a home in a year or so using all of the lessons we have learned.
NACA was a great program and a great experience, but for our specific situation, it was not a happy ending.