0 Down, No PMI NACA Loan - Single Family or Multi Family?

4 Replies

NACA has somewhat of a bad reputation online- but I'm almost done being qualified and it has been great for me so far.

That being said, for those of you unfamiliar, NACA gives you loans with no PMI, 0 down payment, below market interest rates, and you can buy down the interest rate .25% for every 1% of the purchase price. It's pretty unbelievable. There are conditions that 1) you cannot currently own other property and 2) the property must be owner-occupied for the life of the loan.

I thought at first this would be a great opportunity to buy my "forever" home since I would never find a better long-term mortgage. Then, I started to consider using it to buy a duplex in order to start my investment portfolio through house hacking. 

My plan was to buy and live in the duplex, buy a second multi family in 1 year, and then hopefully buy and move into my "dream" SFR in about 2 years.

However, if I wanted to move out of the NACA-financed duplex, I would need to either refinance or sell. Then, I realized since I put 0 down, I would barely build any equity in 2 years so I probably wouldn't be able to refinance easily.

I had wanted to buy the multifamilies before buying the SFR because I wanted to be able to save more money faster and use the rental income to lower my DTI. I was afraid buying a single family house would stretch my DTI and make it difficult to purchase additional multifamilies.

Please, any advice! Should I purchase the single family home first or house hack first? Or do you have other advice?

@Eileen L. , yep. It's hard to beat the system. (Where's that "free lunch" I thought I was going to be getting?)

Your best bet is to research ways of finding BARGAINS, so you're "buying" more equity than you're paying for - right from day one. Dare I say: Researching that is what BiggerPockets is all about? Anyway, welcome to BP. All the best...

Thanks for the advice @brent coombs . I will try.

I also forgot to mention a couple nuances about NACA loans in case anybody else has any input on how to maximize loan usage.

1) I can buy as many other properties I want as long as I buy the NACA property first and live in it for the life of the loan.

2) I can get a NACA rehab loan, although I hear the process is difficult.

3) If I sell all property I own, I can re-qualify for a new NACA loan (as long as it has been 3 years from my first NACA purchase).

I'm purchasing the property with my partner and we have a pre-tax income of about $11000 per month. The properties we are looking at are typically around $2000 PMI per month. In a year our car payments should be about $400. So based on our DTI we should be able to purchase a second property no problem at around $2000, correct?

However, when we want to purchase our 3rd property, I assume our DTI will be maxed out, so we would have to wait 2 years for the rent from the MF to qualify. Is there any way around that?

Sorry for all the questions! I've been reading a lot lately and I'm trying to process it all.

@Eileen L. , living the high life, hey? Why the focus on ZERO down? I would have thought that either: 1. You should already have enough deposit to get an FHA-approved loan without being required to pay mortgage insurance, or 2. You'd at least have the 3.5% deposit for such a loan, thus NOT having to sell your home before re-applying.

Sorry, but I reckon those on $100k+ per year should not need basic holding-hands advice to beat the banks. Cheers...

@Brent Coombs

I'm not necessarily looking for hand-holding, I'm just looking to see if anybody has any ideas on strategies to maximize and take advantage of the tools that I have access to.

We have only very recently reached that amount of monthly income and do not currently have enough to put 20% down.

The focus with NACA isnt necessarily the fact that there is no down payment, but the fact that we can save on upfront costs (no closing costs) and can save monthly (no PMI and lower interest). We could potentially save $100k in interest and pmi on a $300k naca loan compared to a conventional loan when we use the money to buy down the interest rate rather than use the money towards a down payment. However, that is over the course of 30 years.

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