Deciding to buy a home can be attainable for your family. The Federal Housing Administration (FHA) has helped millions of people overcome the barriers to homeownership. The National Association of Realtors reports that 46% of first-time homebuyers use FHA loans annually to help make their dreams of owning a home affordable. FHA loans in NJ are favored over conventional mortgage loans as families can purchase a home with limited credit, permissible co-signers, lower interest rates, and maintainable monthly payments. If you’re wondering how you can lock in an FHA loan for your home purchase, review our guide for all the insight you’ll need!
When you apply for an FHA loan, you must meet the FHA loan requirements in NJ. To apply for an FHA loan, you will need to gather essential information such as W-2 forms from the last two years, recent pay stubs, two years of tax information, bank statements, and more. Once you inquire for an FHA-approved mortgage lender, they will obtain your credit score.
FHA loans are a viable option if your credit score is 580 or above. You can make a down payment of as little as 3.5% on the purchased price or appraised value. FHA loans are conclusive loans to minimum credit score recipients; we recommend you know your credit score before applying for an FHA loan. There are free credit monitoring services online to keep track of your credit score. The higher the score, the lower your interest could be on your loan.
The amount of debt you currently have will also play a role in applying for an FHA loan. When applying for an FHA loan, mortgage lenders will use the DTI (debt-to-income) to help determine the risk associated with you taking on another payment. Your debt-to-income ratio compares how much you owe each month to how much you earn. We suggest you add up all of your monthly bills and calculate your DTI ratio by dividing the sum of your monthly debts to your monthly gross income by using this calculator. NJ’s FHA loan requirement suggests that borrowers should ideally have a total debt-to-income ratio no higher than 43% of their income. There are only exceptions to this rule, such as cash reserves or a minimal increase in housing payment. In these exceptional cases, the DTI can be as high as 56% for FHA loans.
Establish Your Primary Residence
One of the FHA loan requirements in NJ is that you need to prove New Jersey is your primary residence. The property financed through the FHA loan must be owner-occupied. The FHA rule is active, so the loan beneficiaries do not use it for secondary purposes such as rentals or seasonal properties. The borrower must take possession of the home within 60 days after the mortgage closes and live in the house for most of the year.
FHA Loan Limits for New Jersey are limited based on various housing types and local housing costs. FHA loan limits vary from county to county based on home pricing and location. The loan limits can change yearly due to the rising market. When applying for an FHA loan, you will always want to make sure you are looking at the most current information available. Keep in mind; your loan cannot exceed the maximum limit in NJ. The limit in New Jersey has increased to $356,362 for a single-family home. Your realtor or mortgage professional can advise you with data information regarding limitations.
Find A Top Real Estate Agency in New Jersey
Our realtors at Casa Real Properties – Keller Williams Village Square Realty are here to help you answer any FHA loan questions you may have! We work with the top mortgage companies in NJ to help you attain competitive rates for your home. Contact us today to learn more about the FHA loan requirements in NJ and how you can make your dreams of homeownership a reality.
Nancy Pavic is an expert in the New Jersey real estate market. For the past 25+ years, she has brokered Casa Real Properties, a well-distinguished real estate office in the Northern New Jersey area. Her prestigious awards include membership into the Top 1% of Realtors, the “Circle of Excellence” award by the New Jersey Association of Realtors, a front page cover spread of Top Agent Magazine, and a recipient of the Mayoral Award for Financial/Real Estate at the 2009 Paterson Women’s History Awards Ceremony.