FHA loans are a popular mortgage option among home buyers in New Jersey, particularly for first-time buyers with limited down-payment funds. So we’ve put together a list of frequently asked questions (and answers) for those who are thinking of using a New Jersey FHA loan in 2018.
What Is an FHA Loan?
An FHA-insured mortgage loan is different from a “regular” conventional home loan because it receives insurance backing from the federal government. The Federal Housing Administration (part of HUD) insures mortgage lenders against losses that can result from borrower default, or failure to repay.
This is what makes NJ FHA loans unique from other mortgage programs. As a result of the government backing, this mortgage program offers flexible qualification criteria for borrowers.
What Are the Eligibility Requirements?
Anyone who meets the basic eligibility requirements can use a New Jersey FHA loan to buy a home in 2018. There is a common misconception that this program is limited to first-time buyers. But that’s not true. First-time and repeat buyers can use this program, as long as they meet the minimum criteria.
- NJ FHA loans require borrowers to make a minimum investment of 3.5% of the purchase price or appraised value. That’s the smallest down payment you can make when using an FHA loan to buy a house in New Jersey.
- Borrowers who wish to take advantage of this relatively low down payment should have a credit score of 580 or higher, according to current HUD guidelines.
- Borrowers should have a manageable level of debt as well. According to HUD, this means having a total debt-to-income ratio no higher than 56% with an AUS approval — at least in most cases.
If you can check all of these boxes, you might be a good candidate for using an New Jersey FHA loan in 2018. Please contact us if you have questions about these eligibility requirements.
What Are Mortgage Rates Doing Right Now?
FHA mortgage rates in New Jersey have hovered below 4%, on average, through the summer and early fall of 2017. That’s based on the weekly industry survey conducted by Freddie Mac.
These relatively low rates represents a good opportunity for home buyers in New Jersey who want to use an FHA loan — or any other mortgage product, for that matter. We just don’t know how long rates will remain at their current level.
In fact, a couple of industry forecasts suggest that conventional and FHA loan rates in New Jersey will rise as we move into 2018. Economists from both the Mortgage Bankers Association (MBA) and Freddie Mac have predicted a gradual rise in rates over the coming months.
What’s the Most I Can Borrow in 2018?
The amount you can borrow with a New Jersey FHA loan will depend on several factors, including your income, debt level, and the official loan limits for your county.
FHA loan limits vary from one county to the next, because they are based on median home values. In New Jersey, the limit for a single-family home purchase ranges from $275,665 to $679,650. Higher limits apply to the more expensive real estate markets, like those that fall within the New York City metro area.
(Federal housing officials review these limits every year, and they sometimes raise them to keep pace with rising home prices. We will post an update if that occurs for 2018.)
Please contact us if you would like to find out how much you are able to borrow, using an NJ FHA loan.
How Do I Apply for an FHA Loan in New Jersey?
Whether you use an FHA or conventional home loan to buy a house in New Jersey, the mortgage application process is basically the same. There is some extra paperwork required for FHA loans, including HUD disclosures that the borrower must sign. But the overall process is similar.
One of the first steps is to complete a standard mortgage application form, officially known as the Uniform Residential Loan Application. You’ll need to provide some additional documents as well, including tax returns, bank statements, and other financial documents.
When using an FHA loan to buy a house in New Jersey, it’s wise to get pre-approved before you start house hunting. We can review your current financial situation, including your income and debts, to determine how much you might be able to borrow. This is a logical next step, because it helps you narrow your housing search to the kinds of properties you can afford.
Please contact us if you have questions about using an FHA loan in New Jersey in 2018, or if you would like to receive a rate quote.