The Low Interest Rate Program You Probably Haven’t Heard About

  • May 13, 2010

by Joe Marhamati

If you’ve never heard of NACA you aren’t alone, but with perks that you can’t find easily elsewhere, it is a very enticing program for prospective homebuyers.

The Neighborhood Assistance Corporation of America (NACA) is a non-profit advocacy group that provides the opportunity to take advantage of below-market interest rates with little to no closing costs. Started in 1988 by Bruce Marks as a lobbying group for low and moderate income individuals to attain homeownership, NACA is now in over 30 cities. Its self-proclaimed “confrontational community organizing” has been fodder for many news outlets who cover their rallies from the steps of large banks they believe abuse the middle class to Fannie Mae and Freddie Mac where they quite literally park U-Hauls full of property from distressed homes.

The documentary outlining the history of the organization makes a trip to an informational session worthwhile, but so are the interest rates that you can take advantage of if you become a member. Once a member, NACA not only pays the majority of your closing costs, but buyers are given below-market rates that can be bought down literally as far as they want. Similar to points on a mortgage, you can pay more upfront to have a lower interest rate (.25% lower for every 1% of the mortgage amount paid upfront). NACA works mainly with Citigroup and Bank of America, and ordinarily requires that you go through one of these lenders with a 30-year fixed rate mortgage only, eschewing any exotic mortgage packages in favor of a straightforward plan. While there are no income limits to participate in NACA, there are limits to the purchase price of a home, based on its characteristics. For instance, the max price for a one-bedroom condo in DC is $367,790, with limits ranging from $464,449 to $675,000 depending on the size of the home. Also, members cannot be homeowners when they join.

NACA also offers the chance to refinance, with its Home Save program, aimed mainly at helping victims of predatory lending to restructure their current mortgage. It is not uncommon for those who participate in Home Save to significantly reduce their mortgage payments. For this reason, it is highly recommended to those underwater on their mortgages, or who simply bought when interest rates were high.

In order to take advantage of the low rates, NACA requires that you participate in five activities a year to further the mission of the organization and pay a small membership fee. Also, buyers cannot rent their property out and live elsewhere, as the intent of NACA is to help only those who plan to purchase for themselves. For this reason, NACA places a permanent “ghost lien” on the property just in case you decide to leave town and rent it out anyway.

The main drawback of the process is that it can be long and cumbersome, but for someone who knows they want to buy in the next 6-8 months it could be great. The delays are mostly the result of extensive due diligence by its loan officers and a series of procedural hurdles that determine how much you qualify to borrow. Expect to meet with your loan officer a few times, with repeated requests for materials confirming your income and expenses.

While at times the sheer length of the process and amount of information and follow-ups required to see it through can be daunting, from this author’s experience, the rewards were worthwhile. If you know that you will be in a property for at least five years, the ability to pay down the interest rate to a number of your choosing, is an attractive means of dramatically lowering the overall interest paid to the bank throughout the life of the loan.

This article originally published at http://dc.urbanturf.com/articles/blog/the_low_interest_rate_program_you_probably_havent_heard_about/2068

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