Bad credit? NACA will help you address financial hiccups.

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NACA Mortgages: Qualification and Househunting

The NACA workshop is just the first step in a several-month counseling and qualification process aimed at helping prospective homeowners financially prepare for owning a home and cleaning up their credit, if necessary. A NACA mortgage consultant guides members through this process.

Before meeting with the mortgage consultant the first time, members should gather the information that will help their consultant to determine how much they can afford to spend on a house, including monthly budgets, pay stubs and bank statements. The consultant plugs this info into NACA-Lynx, the paperless, Web-based system that tracks the criteria that members must meet to become qualified.

The mortgage consultant uses character lending to determine what members can afford and what they will need to do to pay for the house over time. Character lending focuses on more than a credit score number; it addresses problems like bad credit so that they are no longer an issue with the bank. The mortgage consultant also will help a member to figure out the difference between a current rent payment and a future mortgage payment and to budget appropriately. The consultant will point out other costs, too, such as homeowners' insurance and inspection fees, and assist the member in planning for them. Once members are cleared by their consultants as NACA Qualified, they can start househunting.

NACA members can buy condos, co-ops or one- to four-family residences. As we mentioned previously, there is a maximum purchase price that varies by region and accounts for urban and rural differences. There's also an individual maximum price, dependent upon how much the individual can pay each month; in this way, the organization tries to prevent people from buying homes they can't afford. Members may use one of NACA's buyer's agents to help with the search, or they can bring in their own NACA-approved real estate agent.

When a member finds a house, the agent helps to negotiate the purchase and sale contract, the document that binds the buyer and the seller. Then, because the organization wants to ensure that the house remains affordable, members must use an approved home inspector to identify necessary repairs and potential problems. The seller or the buyer can complete the repairs. If the buyer takes them on, he can choose to finance the repairs through the mortgage.

If the house needs more than a few repairs and is more accurately called a fixer-upper, NACA will work with members on the renovations. NACA's Home and Neighborhood Development (HAND) department monitors the renovations, and their expense is added to the cost of the mortgage. If the renovations are so extensive that the home is unlivable, NACA will defer mortgage payments for six months while the work is done. NACA will also reduce the interest rate by 0.375 percent if the owner takes on the renovations [source: NACA], which is another way for the organization to invest in neighborhoods that might need some work.

Find out what members still have to do before moving into home sweet home.