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MEMBER’S INITIAL ASSESSMENT

Row

Financial Assessment

Income, PSS & MRF

Example

Member’s

Info

INCOME

Number of adults earning income who will reside in

your future household.

2 adult incomes

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

Monthly Gross Income – W-2 Household Salaries

$2,600+$3,000 = 5,600

Monthly Gross Income – W-2 Household Commission

Monthly Gross Income – Self-employed Income

Total Gross Monthly Income:

$5,600 (Income)

DEBTS

(car payments, student loans, credit card minimum

payments, etc.)

Total Monthly Debts:

$500 (Debts)

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

obligations is your maximum payment)

$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

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

interest of your loan.

$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

reduce your principal or permanently buy-down the

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

$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.

MRF Additional Requirement:

Subtract Minimum Required Funds (Row 28) from

Current Assets (Row 22). If the number is negative,

you must increase your funds by this amount. With

your counselor, use the budget to determine how long

it will take to save this amount, unless you can count

on other funds such as a gift from a relative, tax

return, etc.

$3,000 MRF

-$3,354 Funds

-$354 MRF Short

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