Is the NACA program the way to go for a first time buyer?
Hey everyone, I am new to Real Estate investing. I just recently got in contact with a loan officer to help me find a lender. But this morning as I was driving to work, I was listening to the BiggerPockets podcast episode 590 and the guest mentioned he used the NACA Program to get into his first investment. I was looking into this program a bit and was just wondering if anyone else used this program to get started in real estate investing and also why isn't this program being talked about more? Thanks in advance.
Hi @Edgar Gonzalez first, welcome to the real estate investing community! I am a mortgage broker so I can help you with this.
There are a few issues with NACA. Specifically for investment properties. The biggest issue is that they require that you live in the property as long as you have a NACA mortgage. So if you ever decide to move out and make it an investment property, you would need to refinance into a conventional, DSCR, net rent, or some other program. By then, rates could be in the 3s or in the 13s. It's a risk that you have to be willing to take. Additionally, they have stricter underwriting guidelines and lower loan limits. If you plan to live in the property until you die and need the assistance, it can be a good program but for your needs, it might not be the one for you.
There are other issues but I wanted to give you some information now. If you want to learn more about the pros and cons or simply compare your lending options, feel free to reach out.
There are actually two NACA groups. One is ran by supposedly consumer advocate attorney's that operate on a contingency basis. The other is Neighborhood Assistance Corporation of America. They were or are doing a lot of homeowner modifications. Didn't know they had such a program for investors. I'd recommend going FHA on a quad if you could. You could live in one and rent the others the way you want to manage them. Being in Orlando bet you could book a lot of daily/weekly or monthly rentals. Maybe a more experienced FHA person could fill you in as to how it works better. Kinda curious about it myself. I know what I qualify for on a regular residential property. But it probably wouldn't be enough to buy a quad without using rental income. I know it mandates living in it for a year but maybe longer if you want to have someone else pay your housing expense.
Quote from @Andrew Garcia:Hey Andrew, you’ve made a good point there. I do not plan on living in my first property for ever! And also with the market we are in now, I can’t take no risks and bet to refinance at lower rate a year from now because I do plan on staying at the property for at least a year and then moving on to the next. Thank you for your reply, this was great information.
Hi @Edgar Gonzalez first, welcome to the real estate investing community! I am a mortgage broker so I can help you with this.
There are a few issues with NACA. Specifically for investment properties. The biggest issue is that they require that you live in the property as long as you have a NACA mortgage. So if you ever decide to move out and make it an investment property, you would need to refinance into a conventional, DSCR, net rent, or some other program. By then, rates could be in the 3s or in the 13s. It's a risk that you have to be willing to take. Additionally, they have stricter underwriting guidelines and lower loan limits. If you plan to live in the property until you die and need the assistance, it can be a good program but for your needs, it might not be the one for you.
There are other issues but I wanted to give you some information now. If you want to learn more about the pros and cons or simply compare your lending options, feel free to reach out.
Quote from @Kathy Utiss:
There are actually two NACA groups. One is ran by supposedly consumer advocate attorney's that operate on a contingency basis. The other is Neighborhood Assistance Corporation of America. They were or are doing a lot of homeowner modifications. Didn't know they had such a program for investors. I'd recommend going FHA on a quad if you could. You could live in one and rent the others the way you want to manage them. Being in Orlando bet you could book a lot of daily/weekly or monthly rentals. Maybe a more experienced FHA person could fill you in as to how it works better. Kinda curious about it myself. I know what I qualify for on a regular residential property. But it probably wouldn't be enough to buy a quad without using rental income. I know it mandates living in it for a year but maybe longer if you want to have someone else pay your housing expense.
Hey Kathy, as a first time home buyer I think I might have to go for an FHA loan as I can only afford to put down less than 20% on an investment. Also, with the NACA program, as mentioned by @Andrew Garcia this program could be an option but it’s tailored more for people who want to live in their home for the rest of their life.
Quote from @Edgar Gonzalez:
Quote from @Kathy Utiss:
There are actually two NACA groups. One is ran by supposedly consumer advocate attorney's that operate on a contingency basis. The other is Neighborhood Assistance Corporation of America. They were or are doing a lot of homeowner modifications. Didn't know they had such a program for investors. I'd recommend going FHA on a quad if you could. You could live in one and rent the others the way you want to manage them. Being in Orlando bet you could book a lot of daily/weekly or monthly rentals. Maybe a more experienced FHA person could fill you in as to how it works better. Kinda curious about it myself. I know what I qualify for on a regular residential property. But it probably wouldn't be enough to buy a quad without using rental income. I know it mandates living in it for a year but maybe longer if you want to have someone else pay your housing expense.
Hey Kathy, as a first time home buyer I think I might have to go for an FHA loan as I can only afford to put down less than 20% on an investment. Also, with the NACA program, as mentioned by @Andrew Garcia this program could be an option but it’s tailored more for people who want to live in their home for the rest of their life.
Actually, @Edgar Gonzalez since you are a first-time homebuyer you can put 3% down conventional. This could make more sense since you don’t have mortgage insurance for the life of the loan, the monthly payments could be cheaper, and they are easier to get offers accepted in this market.
I would look into that and ask the lenders that you are shopping with to give you rate quotes on both and give you a side-by-side comparison of the two.
Quote from @Andrew Garcia:
Quote from @Edgar Gonzalez:
Quote from @Kathy Utiss:
There are actually two NACA groups. One is ran by supposedly consumer advocate attorney's that operate on a contingency basis. The other is Neighborhood Assistance Corporation of America. They were or are doing a lot of homeowner modifications. Didn't know they had such a program for investors. I'd recommend going FHA on a quad if you could. You could live in one and rent the others the way you want to manage them. Being in Orlando bet you could book a lot of daily/weekly or monthly rentals. Maybe a more experienced FHA person could fill you in as to how it works better. Kinda curious about it myself. I know what I qualify for on a regular residential property. But it probably wouldn't be enough to buy a quad without using rental income. I know it mandates living in it for a year but maybe longer if you want to have someone else pay your housing expense.
Hey Kathy, as a first time home buyer I think I might have to go for an FHA loan as I can only afford to put down less than 20% on an investment. Also, with the NACA program, as mentioned by @Andrew Garcia this program could be an option but it’s tailored more for people who want to live in their home for the rest of their life.
Actually, @Edgar Gonzalez since you are a first-time homebuyer you can put 3% down conventional. This could make more sense since you don’t have mortgage insurance for the life of the loan, the monthly payments could be cheaper, and they are easier to get offers accepted in this market.
I would look into that and ask the lenders that you are shopping with to give you rate quotes on both and give you a side-by-side comparison of the two.
@Andrew Garcia I am still pending program eligibility as well as full qualification so, I assume this conversation will come up next time I talk to my loan officer.
I'm searching for a multi-plex with NACA right now and @Andrew Garcia is right, NACA offers really low mortgage limits!!!