Are you thinking of purchasing your first home in the Garden State, but lack the seed money to realize your homebuying dream?
Well, we’ve got good news if you think a moderate income (or low credit score) stands in your way of becoming a homeowner. New Jersey’s state-sponsored, first-time homebuyer assistance programs could provide the money you need to help lower the costs of purchasing your first home.
Here’s everything New Jerseyans need to know about how to land a low-interest rate loan, funds toward your down payment, and money for closing costs.
First-time homebuyer programs
If you’re looking to buy a home in New Jersey and have never purchased a home before—or haven’t owned a home in the past three years—you might qualify for the New Jersey Housing and Mortgage Finance Agency’s First-Time Homebuyer Mortgage Program. The program offers a 30-year fixed-rate conventional FHA, VA, and USDA-RD government loans with competitive interest rates.
Qualified homebuyers can also score an additional $10,000 toward downpayment and/or closing costs through the NJHMFA Down Payment Assistance Program.
The down payment assistance program is a forgivable loan with no interest or monthly payments—as long as the homebuyer makes the home the primary residence for five years from the loan closing date and doesn’t sell or refinance the first mortgage.
Keep in mind that how much of a down payment a borrower needs to bring to the table depends on the type of loan you land. For instance, an FHA loan requires a 3.5% down payment, whereas VA and USDA loans might not require any down payment at all.
Do you qualify?
New Jersey provides financial assistance for first-time homebuyers by selling tax-exempt bonds to private-sector investors and by drawing on state grants and housing assistance programs. Since the agency’s borrowing costs are low, the homebuyer reaps the savings.
But New Jersey doesn’t give out financial assistance to every first-time buyer.
Borrowers must meet the credit score and debt-to-income ratio requirements and NJHMFA income and purchase price limits. (There are higher income limits if you’re looking to buy a property in an urban target area.)
What kind of house can I buy?
Luckily, many property types are available to first-time homebuyers using NJHMFA programs.
For example, you could pick a single-family home, townhome, condominium, or manufactured or mobile home. You can also buy a multifamily house and occupy one of the units as your primary residence while generating income by renting out the other units.
All properties must be up to snuff with the borrower’s loan guidelines.
Police and Firemen’s Retirement System Mortgage Program
Suppose you are an active member of the Police and Firemen’s Retirement System with at least one year of creditable service. In that case, you might be eligible for the Police and Firemen’s Retirement System Mortgage Program.
All approved borrowers can snap up a low-interest, 30-year fixed-rate mortgage based on the 10-year Treasury bill plus 1%. And while there is no first-time homebuyer requirement for the assistance program’s funds, at least 25% of the money is reserved for these borrowers.
One caveat: If you land a loan but have less than 20% of the down payment, you must pay mortgage insurance plus closing costs and application fees.
Eligible properties include the following:
- One- or two-family homes
- New construction of one- or two-family homes on vacant land
Neighborhood homebuyer’s assistance
Head to your local city or county website to see if there’s additional financial assistance available where you want to lay down roots. Eligibility requirements vary and funds might be limited, but there are many good options throughout the Garden State.
For instance, the Homebuyer Down Payment Assistance Program of Gloucester County provides money for a down payment and closing costs for homebuyers with low to moderate incomes. But there is a minimum of 3% personal financial investment required of the buyer.
In return, homebuyers get a zero percent, $10,000 forgivable loan.
Iif you want to put your feet in the sand, the Atlantic City Down Payment Assistance Program provides up to 10% of the purchase price and up to $5,000 toward closing costs. (However, the combined total cannot exceed $30,000.)
And while this is a deferred zero-interest loan, specific repayment requirements apply.
How to find a lender familiar with NJHMFA programs
There’s no one-size-fits-all when it comes to mortgages.
Interest rates, down payment requirements, and how much of a monthly payment you can afford are just a few factors that come into play when shopping around for the best mortgage. That’s why meeting with a couple of participating lenders is essential.
“Get loan estimates from each lender at the same rate for the same loan product,” advises Matt Hackett, operations manager at Equity Now in Mamaroneck, NY. “For example, if you get a 30-year fixed-rate quote from one lender, get the same quote from the next.”
Then, compare the loan estimates, fees, and fine print.
“If you are more comfortable with one of the lenders, but their rate is not the lowest, ask them if they can match or beat a competitor’s rate,” says Hackett. “They should be able to tell you why they can or why they cannot.”
Finding your dream home
The financial assistance from the NJHMFA goes a long way in opening the door to your first home. But even with financial worries aside, there still might be some hiccups along the way.
“The negative side to this is that these grants are still available because there is so much competition on the buying side,” says Christopher Avalon, broker and owner at Avalon Real Estate Group in Princeton, NJ.
For instance, if sellers have a conventional loan or cash offer, they might brush off a homebuyer with an FHA mortgage, adds Avalon. In addition, these loans are typically subject to additional home inspections that conventional loans don’t require. And sellers might not want to deal with the delay or added hassle.
That’s not to say all hope is lost. Most homebuyers hit a snag or two on their homebuying journey. A good measure of patience is essential for all first-time homebuyers, no matter what type of mortgage you land.
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