FAQ: Property Condition
The properties purchased with the NACA Mortgage can be an existing property sold as-is and ready to move into once the loan closes, property needing rehab/renovation, or new construction homes.
NACA requires a home inspection. Every existing property purchased through the NACA program must be inspected by a licensed home inspector.
The inspector must utilize HomeGauge software so that NACA's property repair department called Home and Neighborhood Development ("HAND") can process the information. It is crucial that Members purchase a home where there are not significant rehabilitation issues or available funds for the rehab work. . If there are health, safety, code or structural issues there must be funds set-aside to complete the repairs after closing. NACA works with Members to verify they can afford the additional amount of the mortgage.
NACA does not have home inspectors, however the HAND department maintains a list of vendors. Members must use a licensed home inspector who either is or will be registered with NACA and agrees to use the HomeGauge software.
No. Members should never make repairs to a property they do not own.
The NACA HAND department works with Members to review home inspections, assess any necessary repairs, and determine a budget to address repair issues. They then work with Members to process the payments for repairs to be completed after the closing.
The term “HAND Clear” is property clearance for the NACA Mortgage. To become HAND Clear all lender and NACA required repairs must have been addressed by either the seller or funds provided in a Repair Escrow. The HAND department will engage and work with Members at every step of this process.
At the Purchase Workshop the Member receives the list of local licensed inspectors who use NACA's HomeGauge software. A Member can use another inspector but they need to be licensed and use NACA's HomeGauge software. It is unlikely that a new inspector can accomplish this in time to do a requested inspection if they do not already have and use the software. It will take time to install and become familiar with a new inspection software.
The process is the following:
- Member attends the home inspection.
- Home inspector uploads the inspection documents into the Member’s file using the NACA HomeGauge software.
- A Rehab Specialist in NACA's HAND Department reviews the report and determines the required repairs for all code, safety, health and structural items.
- The Rehab Specialist emails the Member and their real estate agent the NACA Repair List. It will identify any required or recommended repairs and the estimated cost to resolve.
- The Member determines and indicates on the Repair List who will address the repairs: seller, Member with their own funds, Member with funds from the mortgage, or other funds.
- Member selects "Save & Submit" which transfers the data the Member inputted to be reviewed by the Rehab Specialist.
The scope of work is the list of repairs and home improvements that will take place after the loan closes. The scope of work provides a description of repairs and the estimated cost it will take to complete them. It is drafted by a Rehab Specialist using one or more of the following: property inspection, evaluations licensed trade professional, work write-up by a HUD feasibility consultant and other supporting documentation.
Required repairs are the following: code, safety, health and structural. Recommended repairs are optional such as: cosmetic, deferred maintenance, and minor repairs. Required repairs must be addressed by the seller or with funds to be completed by the Member after closing. Not addressing required repairs can make the home unaffordable.
An evaluation by a qualified licensed professional in that trade is required. They are the most qualified to provide a detailed assessment on the cause of the defect, how to remedy it and the cost to correct.
For existing properties (not new construction) Members may add to the Repair List additional elective repairs or home improvements called “Wish List” and include the estimated cost of such items. The Wish List Item must be attached to the property, bring value and be within the Members affordability. These repairs must be approved by HAND and are subject to other criteria, including but not limited to, the Member’s ability to make these repairs without financing.
The requirements to qualify for a Repair Escrow to complete repairs after closing are the following:
- The property must be pre-existing (i.e. cannot be new construction)
- Amount must be within the Member's Maximum Mortgage Amount and not exceed 110% of the subject-to LTV
- Member must agree and sign the Member Rehabilitation and Disclosure Agreement and Lender's Work Escrow Agreement
The Member needs to research contractors in their local areas using the following: recommendations from friends and family, social media, contractor websites, government approved licensed contractors, and other outreach.
NACA provides a courtesy list of licensed registered professional contactors recommended by other Members and real estate agents.
The contractor should go to the NACA Vendor contractor portal and enter their company information. The contractor needs to upload the following:
- License and/or certification
- Proof of insurance
- Valid W-9 Tax Identification
Once the above information has been completed, the contractor needs to contact the HAND Department at 210-319-2978 or email@example.com to complete their registration process.
A contractor can submit a bid by going to the vendor contractor portal and completing the following steps:
- Register if new to NACA
- Log-in to NACA's Vendor Portal
- Select submit bid
- Enter the Member's NACA ID
- List of repairs defined in the Member's scope of work will be displayed for the contractor to bid
- Enter bid
- Once completed select "Submit & Complete" and the bid will be uploaded to the Member's file.
- A NACA Rehab Specialist will review and follow up
A contractor is eligible for payment once the following is complete:
- Contractor is registered with NACA
- Bid is approved by NACA and the lender
- Inspection has been completed by a NACA approved draw inspector
- Draw Inspection identifies that work is partially or fully completed
- Member has approved the amount to be released to the contractor
- Contractor has provided an appropriate lien waiver in the amount of the payment being released
A Repair Escrow are funds to be used for repairs and renovations after the loan is closed. The Repair Escrow can be funded with seller contribution, Member's out of pocket funds, loan financing, and/or grants. The Repair Escrow is held by the lender and managed by NACA's HAND Department working with Member to facilitate the completion of the scope of work repairs.
Many Members purchase new properties. The builder or listing agent needs to notify the NACA Closing Coordinator when the property will be ready for occupancy (Certificate of Occupancy required). At that time an initial appraisal (1004) is ordered, if the report is completed before the property is complete, a final appraisal (1004D) will be ordered. Property inspections are not required for new construction.