How the NACA Budget Works, and What It Decides

Most mortgage programs start with your credit score. NACA starts with your budget. The monthly budget you build in NACA's portal, checked against your real bank data, decides two things: how big a mortgage payment you can take on, and whether you can prove you'll handle it.

That's why NACA's budget forms feel so detailed. They aren't busywork. They're the inputs to a formula, and once you understand the formula, you can prepare for your counseling sessions instead of being surprised by them.

Want to run your own numbers? The free NACA budget & payment worksheet walks through the same four steps. Nothing you type is sent or saved.

Step 1: The payment NACA will allow

NACA calls your future mortgage payment, including taxes and insurance, your PITI: principal, interest, taxes and insurance. Your maximum PITI is the lowest of three numbers:

Limit	How it's calculated
Rent plus savings	Your current rent plus the extra you've shown you can save each month
Housing ratio	33% of your gross monthly income
Debt ratio	42% of your gross monthly income, minus your monthly debt payments

The first limit is the one people miss. NACA treats your current rent as proof of what you can afford. To qualify for more than your rent, you have to show it: save the difference every month, for at least three months, before NACA counts it.

A worked example

NACA's own workshop uses a household like this:

• Two earners: $15 an hour at 40 hours a week ($2,600 monthly), and a $36,000 salary ($3,000 monthly). Total gross income is $5,600 monthly.
• $300 in monthly debt payments.
• $1,700 rent, and $350 in monthly savings.

The three limits:

• Rent plus savings: $1,700 + $350 = $2,050
• Housing ratio: $5,600 × 33% = $1,848
• Debt ratio: $5,600 × 42% − $300 = $2,052

The lowest is $1,848, so the housing ratio sets this household's maximum payment. If their savings were only $100 monthly, rent plus savings would be $1,800, and that would become the limit instead.

Turning paychecks into monthly income

Use gross pay, before taxes, for every adult earner who will live in the home:

You're paid	Multiply one paycheck by	Then divide by
Every week	52	12
Every two weeks	26	12
Twice a month	24	12
Hourly	hourly rate × hours per week × 52	12

Every-two-weeks and twice-a-month pay aren't the same thing. Mixing them up is one of the most common mistakes.

Step 2: The budget that proves it

NACA's Current Budget form lists everything coming in and going out: take-home pay, debt payments, rent and housing costs, and then dozens of everyday spending lines, from utilities and groceries to subscriptions, pet care and bank fees.

What's left at the bottom is your Monthly Available Savings:

take-home pay − debt payments − housing costs − everyday spending = Monthly Available Savings

NACA wants that number to cover two things:

1. Your payment increase. That's the difference between your target payment and your current rent. In the example, $1,848 − $1,700 = $148.
2. A monthly cushion of at least $200 for a single-family home, or $400 for multi-family, for repairs and surprises once you own.

If your budget doesn't leave enough, the counselor will work with you to cut spending, pay down a debt, or aim for a lower payment.

Real numbers, not estimates

NACA's materials say most people can't account for about 20% of their spending. The budget only works if it reflects what actually happened:

• Use your bank and card statements, or let NACA import your bank data in the portal and categorize at least three months of transactions.
• Mark one-time items as one-time. A tax refund or a single big repair shouldn't count in your monthly pattern.
• Use the Daily Household Expense Form for small spending. Write down every coffee, lunch, rideshare and parking fee for seven days, then multiply the week by four. It's the fastest way to find where the missing 20% goes.

The savings have to show up in the bank

Your budget makes a promise, and your bank balances have to keep it. NACA looks for your total balances to grow each month by your savings amount. These don't count:

• moving money between your own accounts
• savings funded by a growing credit card balance or a new loan
• stopping your retirement contributions to free up cash
• gift money, which can help with other costs but can't stand in for your own savings history

Step 3: What that payment can buy

Your maximum payment has to cover taxes, insurance and any HOA dues first. Only what's left goes to principal and interest, which is why the same payment buys different prices in different places. Real estate tax rates for 2026 are $1.20 per $100 of assessed value in Richmond City, $0.83 in Henrico and $0.81 in Hanover.

To turn a payment into a price, subtract the monthly taxes, insurance and dues, then use NACA's current rate (posted at naca.com) to see what loan the rest supports. NACA finances the full price, so the loan is roughly the price. NACA's buydown can stretch it further: each point you pay, 1% of the loan, lowers the rate by about one-sixth of a percent.

For buyers above the area median income, the census tract can also change the rate. See NACA and census tracts.

Step 4: The cash you'll still need

Even without a down payment, you'll need cash. NACA's Minimum Required Funds cover what you'll pay out of pocket:

Item	What NACA's forms use
Home inspection	About $500, more for multi-family
Homeowners insurance	15 months: 12 prepaid plus 3 to start the escrow account
Property taxes	3 to 6 months, depending on when you close
Prepaid interest	Interest from closing day to the end of that month
Reserves	1 month of payments if your payment increase is under $300; 2 if more; 3 if self-employed; 4, 5 or 6 for two-, three- and four-family homes

NACA also expects at least $2,500 on hand. Earnest money is separate, and it's credited back to you at closing. Keep the funds in your own accounts and leave them there during the process. Moving money around makes it harder to document.

Mistakes that cost buyers months

• Estimating instead of checking. A budget built from memory almost always comes in too optimistic, and your bank data will show the gap.
• Forgetting the cushion. A budget that covers the payment increase exactly, with nothing left over, falls short of NACA's $200 or $400 minimum.
• Counting transfers as savings. Only growth across all your accounts counts.
• Deferred student loans at $0. NACA needs a letter from your servicer showing the payment you'll owe.
• Leaving out a household member's debts. Everyone who will live in the home and is on the mortgage brings their debts into the debt ratio.
• Booking intake before the numbers are ready. Finish the portal budget and categorize your transactions before your appointment.

The bottom line

With NACA, your budget is your approval. Build it from real statements, save the payment increase plus a cushion every month, and line up your Minimum Required Funds early. Then your first counseling session becomes a check-in instead of a reset.

Work through your own numbers, print the result, and bring it to your NACA counselor.

NACA sets its own ratios, reserves and requirements, and they change over time. This article is education, not a loan offer. Confirm your figures with your NACA counselor.