New Jersey First-Time Home Buying Assistance Programs & Grants for 2022

New Jersey First-Time Home Buying Guide

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    By Walecia Konrad

    (Last Updated – 06/2022)

    The Garden State saw record real estate sales in some areas in recent years as city dwellers fled to the suburbs and more rural areas amid the pandemic. The market slowed a bit in 2022, with the number of homes for sale in April falling 14.5% year-over-year, yet home prices continued to rise.

    In New Jersey that translates into one of the country’s most expensive markets. The median home sale price rose 9.4% year-over-year in April, to $433,700, according to real estate firm Redfin. Hot spots like Haddonfield, Sea Isle City, and Montclair saw home prices jump 60% or more.

    5 New Jersey Programs for First-Time Homebuyers

    To help first-time homebuyers break into this expensive market, the New Jersey Housing and Mortgage Finance Agency offers a handful of statewide programs with competitive rates, down payment assistance, and relatively generous income and price limits. In addition, because many areas in New Jersey have robust real estate and first-time homebuyer markets, such as Jersey City and many of the seaside towns, borrowers will want to check for programs in the specific county or city they are considering.

    Here’s a closer look at the finance agency programs for first-time homebuyers looking for competitive mortgages and down payment assistance.

    1. First-Time Homebuyer Mortgage

    This program offers first-time homebuyers (meaning you haven’t owned a home in the past three years) government-backed 30-year fixed-rate mortgages at competitive interest rates. The loans can be combined with New Jersey’s down payment assistance program. (See below.)

    Veterans and buyers in certain target areas need not be first-time homebuyers, but they must not own another primary residence at closing.

    To qualify, first-time homebuyers must meet credit score and debt-to-income ratio requirements, which vary by location, and meet income and purchase price limits. The limits are set based on the number of people in your household and the location of the property you want to buy, but generally your income may not exceed 140% of the area median income. Price limits can be higher for houses in certain designated areas. In all cases the property may be a single-family home, condominium, townhome, manufactured or mobile home, or a two- to four-unit dwelling where one unit is the principal residence of the borrower.

    2. HFA Advantage Mortgage Program

    Similar to the program above, this one provides first-time homebuyers with a 30-year, fixed-rate conventional loan, affordable mortgage insurance, and low down payment requirements that can be coupled with New Jersey Housing and Mortgage Finance Agency down payment assistance.

    Veterans and some buyers in targeted urban areas need not be first-time buyers but may not own another primary residence at closing. Single-family homes, condominiums, townhomes, and planned unit developments are allowed.

    Income limits for these loans are lower than for the First-Time Homebuyer Mortgage; income may not exceed 80% of the area median income. Borrowers must have a credit score of 620 or higher and meet debt-to-income requirements.

    3. Police and Firemen’s Retirement System Mortgage

    New Jersey police officers, firefighters, and members of the Police and Firemen’s Retirement System may be eligible for a 30-year fixed-rate loan with competitive rates up to $647,200.

    One- or two-family homes are allowed, as well as condos or land to build a home on as long as it will be your primary residence. Lender and administrative fees apply. A portion of this program is reserved for first-time homebuyers. Repeat buyers are also welcome.

    4. Homeward Bound

    Like many of the other programs, Homeward Bound offers first-time homeowners a competitive 30-year fixed-rate government-insured loan that can be paired with New Jersey’s down payment assistance program.

    The property must be the borrower’s primary residence and must be occupied within 60 days of closing. There are credit score and debt-to income requirements, which vary by purchase and lender. Income limits vary by location but may not exceed 140% of the area median income.

    5. New Jersey Down Payment Assistance

    Down payment assistance is available for first-time homebuyers who have qualified for a New Jersey Housing and Mortgage Finance Agency loan. Residents may qualify for up to $10,000 to use toward a down payment or closing costs.

    This is a five-year forgivable second mortgage. No interest is charged on the loan, and borrowers do not have to make monthly payments. Income restrictions and purchase price limits apply and vary by location.

    Who Is Considered a First-Time Homebuyer in New Jersey?

    The New Jersey Housing and Mortgage Finance Agency defines a first-time homebuyer as someone who has not owned a primary residence in the past three years. For some of the agency programs, buyers in a targeted area or veterans may be repeat buyers as long as they do not currently own another primary residence.

    Recommended: Guide to Buying Your First Home

    How to Apply to New Jersey Programs for First-Time Homebuyers

    The New Jersey Housing and Mortgage Finance Agency is not a lender, but it provides detailed information about each of the programs above, including location, price and income limits, and credit score requirements. The website also provides a list of approved lenders.

    It’s especially important for first-time buyers, who may be unfamiliar with the mortgage borrowing process, to compare interest rates, fees, and terms among several lenders to make sure they’re getting the most affordable loan available.

    It’s also a good idea to learn about mortgage insurance and guarantee fees.

    Recommended: Understanding the Different Types of Mortgage Loans

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    You can learn more about FHA loans in general and FHA lending limits in New Jersey by county on the FHA website .

    Freddie Mac Home Possible® Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady® Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible surviving spouses may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. For most applicants, there is a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment mortgages to buy, improve, or build a home on federal trust land. The VA is the mortgage lender on NADLs. The funding fee applies.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans that are guaranteed by the Department of Agriculture in specified areas. Borrowers must meet USDA income requirements, and will pay an upfront guarantee fee and an annual fee that serves as mortgage insurance. Eligible properties are listed by region on the
    USDA website .

    HUD Good Neighbor Next Door Program

    This program helps teachers, police officers, firefighters, and emergency medical technicians qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in a HUD “revitalization area.” They must live in the home for at least three years.

    HUD offers more information on programs designed for homebuyer affordability in New Jersey on its
    website .

    New Jersey Homebuyer Stats for 2022

    Here’s a snapshot of the New Jersey homebuyer, according to a 2021 National Association of Realtors® report.

             
    New Jersey United States
    % of first-time buyers 38% 31%
    Typical buyer age 45 47
    Median buyer income $103,600 $96,500
    Typical home size and vintage 1,800 square feet, built in 1999 1,900 square feet, built in 1993
    Median number of miles between home purchased and home moved from 15 15

    Additional Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, other financial strategies may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    New Jersey offers a streamlined approach to first-time homebuyer mortgages along with a generous down payment assistance program. In addition to statewide programs, many localities offer initiatives that can help first-timers break into the New Jersey real estate market. Borrowers throughout the state may also find alternatives among the federal government’s first-time homebuyer programs.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

    View your rate


    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Check with your lender, real estate agent, local nonprofit housing advocacy groups, and state housing finance agency for programs in your area.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications. That’s why it’s important to take all possible steps to improve your credit standing before you go house hunting.

    Is there a first-time homebuyer tax credit in New Jersey?

    No. New Jersey is not a state that offers the mortgage credit certificate program for first-time homebuyers.

    Is there a first-time veteran homebuyer assistance program in New Jersey?

    Many of the New Jersey Housing and Mortgage Finance Agency first-time buyer programs include veteran benefits. In many cases, veterans do not have to be first-time buyers to participate. New Jersey veterans also may find options in the federal VA loan programs listed above.

    What credit score do I need for first-time homebuyer assistance in New Jersey?

    With most New Jersey housing agency programs, the lender determines the required credit score. In some cases, a credit score of 620 is required. But there are other private, state, local, and federal loan programs that borrowers with lower scores may be able to access.

    What is the average age of first-time homebuyers in New Jersey?

    The typical New Jersey homebuyer is 45. Nationwide, the average age of first-time homebuyers is 33, according to the National Association of Realtors.


    Photo credit: iStock/Davel5957
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