First Time Home Buyer Guide
First Time Home Buyer Loans NJ
Being a first time home buyer can be exhilarating and a little intimidating. It is one of the largest investments most of us will ever make. It also means you will no longer pay monthly rent for the roof over your head. The equity you build goes toward your future instead of your landlord’s future.
To achieve your dream of first time home ownership, there are special programs available that are backed by the NJ Housing and Mortgage Finance Agency (NJHMFA) that offer low below-market interest rates and help with your down payment.
Our mortgage company in NJ specializes in structuring highly customized first time home buyer loans, so even people with challenging financial situations can still comfortably afford the home of their dreams. Our first time home loan specialists will actively assist you throughout the entire process; and because we’re a direct lender with an established reputation, everything will go faster and more smoothly than it would with a broker.
Jersey Mortgage Company is one of only three New Jersey lenders that received a Lender Certificate of Appreciation from the NJHMFA,noting our leadership in providing affordable housing and innovative solutions to first time home buyers. We are also proud members of the LendRIGHT program that ensures home buyers a premium level of trusted service.
Becoming a First Time Home Buyer in NJ
Once we have determined what size loan you will be able to qualify for, we can determine the price of a home you can comfortably afford.
Qualifying for your home buyer loan
Determining if you qualify for a home loan is an important step in the first time home buying process.
- Pre-qualify and see how much you can afford getting a Quick Rate Quote now
- A credit report will be run to assess your credit score and credit worthiness
- We will look at your income, debt and credit to assets, which loan suits you best and what your down payment should be
Preparing For Your Purchase
You will need a certain amount of cash to purchase your home. We will help you determine how much you need to cover the down payment, fees and closing costs. These fees may include: appraisal fee, loan fees, attorney's fees, inspection fees, and the cost of a title search.
Some important mortgage terms to know:
- Loan-to-Value (or LTV)
This is the loan amount as a percentage of the purchase price or appraised value (whichever is less). If you are buying a $150,000 home with $15,000 down payment you have a 90% LTV. Loans over 80% LTV require either PMI (Private Mortgage Insurance) or a combination of a 1st and 2nd mortgage which avoids the PMI.
- Housing Ratio
This is your total monthly housing expense (principal, interest, tax, insurance, and PMI and homeowner/condo dues) divided by your gross monthly income. If you have a "W2" job your income is easy to determine. If you are self employed, please note your gross income is what you bring from your Schedule C onto line 12 of your 1040. Also, a 2 year history of consistent self-employment income is generally necessary.
- Debt Ratio
This is your total monthly housing expense plus your monthly payments of your installment and revolving debt. This would include child support, alimony or separation maintenance. Student loans and retail deferred payment plans do not count in this situation.
How much can you afford?
Your income and credit will determine the size of the First Time Home Buyer Loan you qualify for. You will need cash for 3 things:
- Down payment: The initial amount you will need available to put toward your home.
- Closing costs: The amount you will need to cover your one-time or "non-recurring" closing costs, plus your "recurring" closing costs (prepaid interest, insurance, impounds if there is PMI) and potential prorated property tax.
- Reserves: You will need more than $10.00 left in the bank after you purchase your home. We need to see 2 months (PITI- sum of monthly principal, interest, taxes, and insurance) of your total monthly housing expenses in reserve.