MEMBERS INITIAL ASSESSMENT
Row
#
Financial Assessment
Income, PSS & MRF
Example
Member’s
Info
1.
INCOME
2.
Number of adults earning income who will reside in
3.
Individual Monthly Gross Incomes W-2 Hourly
Example: \$15 per hour times 40 hours per week,
times 52 weeks for annual income, divide by 12 for
gross monthly income.
1. \$15hr x 40hrs x
52wks÷12 = \$2,600
2. \$36,000÷12 = \$3,000
4.
Monthly Gross Income W-2 Household Salaries
\$2,600+\$3,000 = 5,600
5.
Monthly Gross Income W-2 Household Commission
\$0
6.
Monthly Gross Income Self-employed Income
\$0
7.
Total Gross Monthly Income:
\$5,600 (Income)
8.
DEBTS
(car payments, student loans, credit card minimum
payments, etc.)
Total Monthly Debts:
\$500 (Debts)
9.
MAXIMUM AFFORDABLE PAYMENT
10.
Current Rent
\$1,200
11.
Housing Ratio:
Multiply total gross monthly income (Row 7) by 31%
(31% of your gross monthly income is the maximum
that can go toward your mortgage payment)
\$5,600 x .31= \$1,736
12.
Debt Ratio:
Multiply your gross monthly income (Row 7) by 40%,
and subtract your monthly debts (Row 8) (40% of your
gross monthly income minus all monthly debt
\$5,600 x .40 - \$500 =
\$1,740
13.
Maximum Affordable Payment:
Take the lowest of: Rent (Row 10), Housing Ratio
(Row 11), or Debt Ratio (Row 12). This is your
maximum affordable mortgage payment covering PITI
\$1,200 (PITI)
14.
Maximum Affordable Payment Increase:
15.
Payment Shock Savings:
Deduct current rent (Row 10) from the lower of the
Housing Ratio (row 11) or Debt Ratio (row 12) to
determine your PSS amount (PSS). You need to save
this amount as if you were already making the higher
mortgage payment to demonstrate your ability and
willingness to afford the higher mortgage payment.
The PSS is not necessary if you want a mortgage
payment not exceeding your affordable current rent,
unless you are paying your rent and other expenses
with increased debts or reduced your savings.
\$1,736 \$1,200 =
\$536 (PITI Increase)
16.
MAXIMUM LOAN AMOUNT
17.
Monthly Homeowner’s Insurance (HOI):
\$50
0
This estimated amount will likely be greater
depending on the value of the property, type of
structure, insurance company and other factors.
18.
Monthly Real Estate taxes:
The calculation is: purchase price x tax rate÷12. The
rate varies per area as it is determined by the tax
assessor for each county. Typically, they are about
1% to 4% of the value of the property. Your counselor
can assist with the rate in your area.
\$200
19.
Principal & Interest Payment:
Deduct the estimated homeowner’s insurance (Row
17) and the estimated monthly real estate taxes (Row
18) from your Maximum Affordable Payment (Row
13). This will be the amount left to cover principle and
\$1,200 PITI
-\$50 (Insurance)
-\$200 (RE Taxes)
\$950 P&I Payment
20.
Maximum Loan Amount:
Using mortgage tables below and in the workbook (30
or 15 year-term table) take the Principal & Interest
Payment (Row 19) and find the column for today’s
rate or the closest to today’s rate (available at
naca.com) and find the monthly payment closest to
your affordable payment. The column on the far left
under Mortgage Amount will indicate the loan amount
based on your affordable monthly payment.
You can increase your maximum loan amount by
using your savings and/or government assistance to
interest rate. Using the NACA Buy-Down each
discount point (i.e. one percent of the mortgage
amount) permanently reduces the interest rate by
one-sixth from the already below market rate. Thus,
the formula is: Number of points x 0.167% = percent
rate reduction from starting rate.
\$211,560
(3.5% - 30-yr)
(Mort. Amount)
21.
MINIMUM REQUIRED FUNDS (MRF)
22.
Current Funds:
Amount of funds in all your accounts combined
checking, savings, and cash at home (any cash kept
at home must be deposited into your bank account as
soon as possible). You will need to have a minimum
of \$2,500 to be NACA Qualified to cover the out of
pocket cost for: earnest money deposit (credited at
closing); home inspection; and prepayment for home
owner’s insurance, real estate taxes, and mortgage
interest for the month you move in. You will also
need a reserve of 1 to 3 months of mortgage
payments for single units and up to 6 months for
multi-unit.
\$3,000
23.
Property Inspection:
\$500
Funds allocated to pay a licensed inspector to assess
the structure, safety and health condition of the
property. The cost varies per inspection and per
region costing approximately \$500 or more depending
on the property type. It will likely be more for a multi-
family and a possible reinspection
24.
Pre-paid Homeowners Insurance:
12 months of Homeowner’s Insurance that must be
paid in advance at closing plus 3 months to open the
escrow account for a total of 15 months prepaid.
15 months x \$50 = \$750
25.
Pre-paid Real Estate Taxes:
You will pay about 3 to 6 months of real estate taxes
which will depend on your region and the month you
close
\$200 x 3 = \$600
26.
Pre-paid Mortgage Interest:
You will not pay a mortgage payment the first month
when you move in, but you will be required to pay the
interest rate from the date you close to the end of that
month.
Calculation: Loan Amount x multiply by current
interest rate ÷ 365 (days in the calendar year for the
daily rate) x number of days from the estimated
closing date to the end of the month.
\$211,560 x .0350
÷ 365 Days x 15 days =
\$304
27.
MRF - Reserves:
You must save one to six months PITI for reserve
funds to be available after you close based on the
following criteria:
One-month reserve if PSS less than \$300;
Two-months reserve if PSS is greater than \$300;
Three months reserves self-employment income;
Four months reserves if two-family property;
Five months reserves if a three-family property;
Six months reserves if a four-family or mixed-use
property.
\$1,200 - One month of
PITI
28.
Minimum Required Funds:
Add together Property Inspection (Row 23) + Pre-
Paid Homeowners Insurance (Row 24) + Pre-Paid
Real Estate Taxes (Row 25) + Pre-Paid Interest (Row
26) + Reserves (Row 27) to determine the Minimum
Required Funds. The MRF could be higher if there is
a HOA fee required at closing
\$500 Inspection
+ \$750 HOA
+ \$600 RE
+ \$304 Interest
+ \$1,200 Reserves
\$3,354 (MRF)
29.