The Neighborhood Assistance Corporation of America (NACA) is a social justice homeownership program that helps people enter the housing market, regardless of credit status. And it's proving that character-based lending is a better way to help first-time homebuyers achieve the American dream.

If someone told you they would provide your down payment for a home and give you a mortgage with a below-market interest rate — no credit score needed — you’d likely think they were joking.

But the Neighborhood Assistance Corporation of America (NACA) does exactly that.

This Boston-based nonprofit (which services all 50 states) is more than simply a homeownership assistance program. It fashions itself an economic justice advocacy organization. The mission of NACA’s “Best in America Mortgage” program is to make sure every American, regardless of race or financial class, can purchase — and stay — in a home.

“People use payday lenders. People get scammed big-time on car loans,” says Bruce Marks, CEO and founder of NACA. “It doesn’t mean they are not ready for homeownership. It means that we have systematic racism, and we need to recognize that and overcome it.”

Why homebuying is out of reach for so many Americans

The scene for hopeful homebuyers is pretty bleak these days. Housing prices since the pandemic have increased, resulting in first-time homebuyers dropping from 43% in 2020 to 37% in 2021, according to a Zillow survey.

More specifically, the housing market has never been kind to women and Black Americans. At 43.4%, Black homeownership is lower now than in 2010, according to the National Association of Realtors®. In comparison, the white homeownership rate is 72.1%.

Read more: How much cash do you really need to buy a home?

Zillow’s Economic Research Team released a study this year that said because of inequity in pay, an additional 18% of the housing market could be affordable to women if only they made as much as men. 

These not-cool statistics are where NACA, which receives a substantial amount of its funding from Bank of America (think billions), steps in to help.

How NACA works

NACA uses what it calls “character-based lending” when determining who to approve for a mortgage.

“We only look at payments that they control,” Marks says.

NACA doesn’t disqualify people due to credit scores, which can be inherently racist, skewed, and biased. It also doesn’t factor in medical debt because “it’s a reflection that we have a dysfunctional, unaffordable health care system,” says Marks.

Read more: Does medical debt really go away after 7 years?

Instead, the nonprofit looks at the previous 24 months of your rental payments — focusing heavily on the last 12 months — to see if you can handle a mortgage. If the mortgage payment is larger than the homebuyer’s rent, NACA requires them to save the difference for at least three months to ensure they can handle a higher payment.

NACA does not have income limits but prioritizes homebuyers whose household income is less than the median family income in the area where they plan to purchase. These “Priority Members,” as well as people who buy into “Priority Areas” (low-to-moderate income neighborhoods) regardless of income, get the best interest rates on mortgages.

Read more: How to get out of debt on a low income

NACA’s maximum purchase price for a single-family home is $484,350. However, NACA members can purchase homes as high as $726,525 in a high-cost area. Multi-family home loans can go as high as $1,397,400, depending on the location.

The agency says that it has done between 70,000 and 75,000 mortgages and of those mortgages, the foreclosure rate is lower than 1%. Some 90% of NACA’s homeowners are people of color, Marks says.

Getting a mortgage through NACA can be a lengthy process, but also worth it because, in addition to no down payment, NACA members don’t pay:

  • Private mortgage insurance.
  • Closing costs.
  • Fees.
  • Market-rate interest rates (NACA’s mortgage rates are always below market).

NACA has both in-house real estate agents who are exclusive to the program, as well as referral agents who work for other firms and NACA. The latter agents service locations where NACA doesn’t have in-house agents or where in-house agents can’t meet the demand.

“It’s important that (prospective homebuyers) trust the person they work with,” says NACA’s real estate director, Rob Torres. “If they feel confident in their real estate agent, they will make good decisions for themselves.”

Here are the steps in NACA’s Best in America Mortgage process:

  1. Homebuyer workshop.
  2. Document submission.
  3. Housing counseling and readiness for home ownership (to determine how much they can legitimately afford).
  4. Submission to underwriting.
  5. Purchase workshop to show members how to buy a home through the NACA program and connect with a REALTOR®.
  6. Housing search.
  7. Submission of the Purchase & Sale Contract.
  8. Assessment of property condition (NACA homes must meet certain standards of livability).
  9. NACA Credit Access & Bank Application (underwriters review the file).
  10. Bank approval.
  11. Mortgage closing.
  12. Post-purchase Program/Membership Assistance Program. Members get counseling with budgeting and other transitions they may face as new homeowners. NACA also helps members with vetted home renovation contractors, if needed.

What it’s like to buy a house through NACA

Interestingly, NACA does very little outreach, opting instead to encourage its members to spread the good word. A simple search for #naca on Facebook turns up thousands of posts — mostly joyful testimonies from members who used its services to purchase homes.

Sadé Bowens, 28, of Washington, D.C., learned about NACA in 2018 through her church’s money management presentation for young adults.

“I thought it was too good to be true,” the social worker said.

After researching NACA independently, she opted to try the program.

To save, she gave herself a $25-per-week budget for discretionary spending. She lived with her partner, allowing her to save on rent. She worked three jobs and earned $90,000 during that time. She saved $40,000.

Read more: 5 steps to create a budget that actually works

Despite her hustle, the NACA program was difficult for her initially because she didn’t have rental history to show that she could handle a monthly housing payment. She lived with her partner.

When her relationship ended, Bowens moved into a $1,650-per-month studio apartment, which actually helped her buyer profile with NACA. She proved she could handle paying a monthly housing bill.

In 2021, she purchased a two-story, two-bath townhouse with a finished basement for $432,000. The mortgage on her Southeast neighborhood home is $1,776 per month.

NACA allows members to purchase even lower interest rates, so while she didn’t need a down payment, Bowens opted to use $12,000 of her savings to “buy down” the interest rate to 1.375%. In addition, she spent $4,000 on an earnest money deposit, which was credited back at closing.

“You have to have patience and you have to be organized,” Bowens says.

NACA requires its members to pay an annual $25 fee and be a registered voter if they are legally able to vote. Bowens also does volunteer work as requested by NACA, such as donating school supplies.

“I give back in my daily life anyway,” Bowen says. “It aligns with my core values.”

Featured image: nednapa/Shutterstock.com

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About the author

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Natalie P. McNeal is the author of The Frugalista Files: How One Woman Got Out of Debt WIthout Giving Up the Fabulous Life. It's available in audio and in print.