What You Do Not Know About the NACA Program But Should

The NACA program all sounded too good to be true. And you know what that means. NACA is a HUD-approved company that makes loans to marginal buyers with bad credit or no credit. There are no income requirements, either. Not only that, but no down payment and no closing costs. Now, the NACA program bills itself as the answer to predatory lending for people who otherwise would get suckered into hard-money loans. Or discriminated against. At least that’s the way I read it.

You can see my ranking below in the hierarchy of preferable purchase offers. I rank NACA right below robbing a bank. But then, I’m a listing agent specialist. My team works with buyers. I do not. I represent sellers. So, of course, I see it differently.

I had a vague recollection of hearing about this program many years ago, but never worked with any buyers who needed it. Most buyers have a little bit of money saved, and if they have bad credit, honestly, maybe they should clean up that bad credit first before going further into debt. Not everybody should buy a home. But that’s just a logical opinion based on four decades of experience. You can get an FHA loan with a low FICO score, and there are CalHFA programs to help with down payment money.

Most buyers don’t need NACA. Better options exist.

The Sacramento Bee ran a story on Guild Mortgage, which offers one of the best programs I’ve ever seen for home buyers in Sacramento. No strings attached. In conjunction with Fannie Mae, Guild just gives buyers 2% of the sales price to use as they wish. For a down payment or toward closing costs. No repayment required. No loan recorded. Just free money. Minimum FICO of 680, though but that’s not that high. Only certain areas qualify for this program.

Unfortunately, my sellers instead approved an offer from buyers utilizing the NACA program. This requires a NACA home inspection. And holy cow, that inspection is nearly impossible to pass. I don’t know how any buyer can buy an older home in today’s Sacramento seller’s market with the NACA program, particularly if the repair list we received is common.

Further, the NACA inspector wants the sellers to test a 1978 popcorn ceiling for asbestos. This is a buyer inspection, not a seller inspection. Which, amazingly, the buyers who have zero funds invested in the transaction want the sellers to pay for. If there is asbestos, that requires removal. Very expensive. Air tested by pros, too. Our NACA home inspection calls for licensed contractors and licensed plumbers to evaluate all sorts of things in the house, to the tune of more than $6,000. After evaluation, they demand everything corrected at the seller’s expense.

This overly picky inspector even checked the hard-wired smoke detectors, noting, perhaps incorrectly, that they seemed older than 10 years. Replace them, he said. Along with installing new receptacles in the garage. A grand total of 11 expensive repairs required to pass NACA. Beware, you don’t see this with FHA or VA.

After this experience, I can’t say I would ever recommend to another seller of an older home that they accept a NACA offer. Which is too bad because I can see where there is a need for this type of program in our communities. I also hate to see these buyers’ hopes crushed.

However, we need to get real. The hierarchy that exists in mortgage lending pretty much ranks in the following manner with sellers, especially in multiple offer situations in Sacramento:

1. Cash
2. Conventional with 20% down
3. Conventional with less than 20% down
4. FHA
5. VA
6. CalVet
7. CalHFA down payment assistance
8. Hard money loans
9. Robbing a bank
10. NACA