The NACA mortgage program does not require a down payment (or non-recurring closing costs or private mortgage insurance) so you typically would not combine it with another homebuyer assistance program. That said, the NACA program does allow you to make a down payment if you have sufficient funds and there are multiple benefits to putting money down when you buy a home.
First, a down payment increases the equity you have in the property. The greater your homeowners equity, the more of the property you own relative to your mortgage. Additionally, making a down payment may increase the price of the property you can afford to buy.
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For example, if you qualify for a $100,000 mortgage according the NACA guidelines and you have $10,000 saved for a down payment, you could potentially buy a $110,000 home instead of a $100,000 home. The higher priced home may be a better fit for you and your family.
The NACA program also applies loan limits that cap your mortgage amount. Loan limits vary by county and property type. If you make a down payment you may be able to purchase a home with a price that exceeds the loan limit in your county, depending on your income and where the property is located.
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Although there are multiple reasons to make a down payment with a NACA loan -- or any mortgage program for that matter -- it can be challenging to couple the NACA program with a down payment assistance program.
Down payment assistance programs can help you pay for all or part of your down payment when you buy a home. There are multiple types of assistance programs including grants and subordinated second loans with deferred payments.
With a subordinated second, you are usually not required to make monthly payments on the loan until you sell your home or refinance your mortgage. Deferring the payments lowers your monthly housing expense and makes owning a home more affordable.
Review How Down Payment Assistance Programs Work
Down payment assistance programs are typically provided by HUD-approved local housing departments or commissions in conjunction with participating lenders. Select your state and click "Learn About Home Ownership" on the HUD State Resources Website to be directed to information about programs available to you.
The challenge with combining the NACA mortgage program with a down payment assistance program is that you are required to apply for each program separately. The application process and the qualification requirements for each program may not be compatible.
Qualification guidelines for down payment assistance programs are usually set by the state or local housing commissions. In some cases you are required to work with an approved mortgage lender to be eligible for the down payment assistance program and NACA may not be approved by the program provider. Approved lenders understand how the program works and have experience processing mortgage applications for borrowers with down payment assistance.
Additionally, the NACA program approval process is relatively unique and different than other mortgage programs. Plus, there is an ongoing volunteer requirement program participants are required to fulfill after your mortgage closes. Depending on the type of down payment assistance program you are interested in and the qualification requirements, NACA may not permit the program.
If NACA does not allow you to use a down payment assistance program, consider using a different no or low down payment mortgage program. Combining a down payment assistance program with an FHA, VA, USDA, HomeReady, HomeOne or other low down payment program can enable you to buy a home with minimal personal financial contribution.
Review Best Low Down Payment Mortgage Programs
In closing, if your focus is on getting a NACA mortgage, our recommendation is that you contact NACA to determine if they allow or recommend any down payment assistance programs. You can learn more by visiting the NACA web site.
If you are focused on using a down payment assistance program to help you buy a home, then your first step should be to contact your HUD-approved housing commission to learn about the programs they offer and the approved lenders they work with.
Finally, an increasing number of mortgage lenders are offering their own homebuyer assistance programs. We recommend that you contact multiple lenders in the table below to understand the programs they offer. Plus, shopping lenders is the best way to save money on your mortgage.
"Steps to Homeownership." NACA. Neighborhood Assistance Corporation of America, 2020. Web.
"Resources for Individuals." Grants. U.S. Department of Housing and Urban Development, 2020. Web.