FHA or NACA for first time househack?

Question

Hello! It's time to roll up my sleeves! I am looking at different first time homeowner programs to get into my first house hack!

I know with

FHA

3.5% down with seller assist up to 6%

Smoother process (I heard) than NACA

Since it's federal of course there is a lot of red tape

Have to stay for 1 year

NACA (still need to do more research)

0% down , no down payment, no closing costs

Longer drawn out process than FHA

Have to stay three years? ( not sure on this one)

Buy out clause close to 25k?

I would like to get into a fourplex but a duplex would do! I want to get into something by the end of the year.

Should I go with FHA since they are more proven and used in the investing community and possible get into my house hack quicker?

Should I got with NACA that would help me preserve capital, but have a longer process, but possibly have me in the same place for 3 years which is what I don't want lol

What do you guys think? Thanks in advance!

Rodney Harris · Answer

I went FHA and I had a really good local mortgage broker. Closed in 3 weeks. The appraisal was about a week. Everything went smooth! FHA is pretty standardized in what they do so as long as you have your finances in order and the property isn’t terrible (structurally) you will be fine. I had to put a cover on an HVAC and have a specialist come out for me to put it back on. That was a 1 day thing.

Other than that. Make sure you have good credit and  down payment x2 so if the down payment is $9000 you need want to have another $9000 so $18k total Just to be safe. This is what I follow and I know everyone wont go this smooth! Hope this helps man! Good luck!

Rodney Harris · Answer

Thanks everyone for the advice! I ended going FHA 3.5% down on a fourplex! Closed in 3 weeks!

Melissa Kirchhoff · Answer

@Rodney Harris - Never heard of NACA so I'm guessing it's an area thing (like we're out in the country so we have a rural development - USDA loan type here) I'm guessing this is similar to USDA but honestly not sure so I'll just shut up on that one.

However, FHA is a little bit less smooth than you might think. FHA has guidelines for live ability issues, so it's hard to fund distressed properties with it. Also, you'll have PMI for the life of the loan, which can add a few hundred dollars or more a month for the whole life of the loan (unless you refinance - which costs too) and you are forced to escrow taxes with FHA. So there's some things to consider on that end.

Personally, I always say go conventional when possible (sometimes it's not for people who claim cash as income or have lower credit scores or DTI issues) but if it's just down payment, there's so many 3.5% conventional programs out there now. And you can always ask for seller concessions to cover closing costs (though I don't really recommend that unless you really don't have that capital or need if free for immediate repairs!). So talk to some lenders on that and compare all the numbers in terms of payment and life of the loan stuff.

Allana Alex · Answer

That’s awesome!!!! And a fourplex, congrats!!

FHA or NACA for first time househack?

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