NACA is the Neighborhood Assistance Corporation of America. Their website is NACA.com. (Don’t get it confused with NACA.org.)
NACA is a non-profit organization. It’s not like a bank. If I ask a bank for a mortgage, I first have to get a house under contract at a specific price, and then ask the bank if they’ll give me a loan for a specific amount with a specific monthly payment. The bank asks for documentation about my income, and then decides “yes” or “no” to the deal. NACA does things differently. Their answer is pretty much always “yes”. The only question is “how much”.
So with NACA, I would first go to their seminars and training sessions — yes, training sessions about budgeting and owning a house. After I’m done with their 10 or so step program, they end up writing me a qualification letter for a particular payment amount. Only then do I start shopping for a house, and I make sure I find one such that the cost will lead to a monthly payment equal or lower than the amount in my letter. When I do, and I get that house under contract with the seller, I’m good to go.
The magic that NACA brings to the table is that they’ll let you buy up to a four-family building, and they’ll give you credit against the mortgage for the rent you collect from others. They have a mortgage calculator on their website. It moves around from time to time, but at the time I’m writing this, it’s located at the bottom of the page HERE. (Note that I always check the radio button for desired purchase price, then type in the typical price of a single family home or duplex or quad.) For “Property Type”, one can choose Condo or anything from Single- to Four-Family building. As I mentioned, for multi-family buildings, they offer a credit for the rent I get from others. I just filled out the form again, for a $400,000 quad that rents for $1000/apartment/month, with no extra money put in anywhere. Based on today’s 30-year fixed mortgage rate of 3.625%, it calculated a “Desired Monthly Payment” of only $174/month. WOW! It seems to me that anyone could qualify for $174/month. I know I certainly could. Most mortgage lenders want the mortgage to be no more than 35% (sometimes 45%) of my income. So I would need income between $387/month and $497/month. Well, if I was already in the market for $1000/month rent, my income is certainly more than the higher of those two. If I wanted a nicer quadruplex in a better location, maybe it costs $500,000 instead, but still rents for only $1000/apartment/month. The calculator comes up with a “Desired Monthly Payment” of $730/month in this case. This is comparable to what I would have to pay for a single family house, and is right on the mark. So this quadruplex scenario seems very doable with NACA.
What about the in-law-suite scenario? Again, I’m not sure if they’ll let you call it a “two family” property. But maybe they will. Maybe I have to make a trivial renovation. Anyway, the houses I actually buy today are in the $150,000 price range. If I imagine a $175,000 house that includes a suitable in-law suite, the calculator comes up with a $1023/month payment when I call it a single family, home, WITHOUT having considered that I’m renting part out. So I might be able to make that work even without them allowing me to call it a two family home. But if I do call it a two-family, and then say I rent the main part of the house for $1000/month, the calculator spits out a “Desired Monthly Payment” of only $323/month. So between those two bounds, $323/month and $1023/month, the in-law-suite scenario can definitely work for m.
