Many home buyers in New Jersey believe that they have to make a down payment of at least 20% to qualify for a mortgage loan. But for a typical home purchase, a down payment of that size usually isn’t required. In fact, a new report showed that 52% of buyers in New Jersey and nationwide made down payments of less than 20% when purchasing a property.
Down Payments Below 20% Are Very Common
There are a lot of myths and misconceptions regarding down payments in New Jersey. One of the most prevalent misconceptions has to do with the size of the investment, and the amount that is required to qualify for a mortgage loan. Surveys by the National Association of REALTORS® and other groups have found that many home buyers believe they have to put down at least 20% on a purchase.
Last month, the economic research team from Zillow put out the latest edition of their “Consumer Housing Trends Report” for 2018. It’s a wide-ranging survey covering all kinds of topics that are relevant to home buyers. Their survey “gathered information from a total of 13,439 key household decision-makers” from New Jersey and other states across the U.S.
Among other insights, their study showed that 52% of home buyers make down payments of less than 20% when purchasing a house or condo. This clearly debunks the myth that borrowers have to put down 20% or more to qualify for a mortgage loan.
Granted, there may be cases where a 20% down ...
Summary: The two biggest issues in housing markets across the country right now are a lack of affordability and a shortage of inventory. But once you get beyond the high-priced NYC metro area, a lot of New Jersey housing markets are doing okay in those areas.
Rising home values and mortgage rates have made housing more expensive in New Jersey and across much of the nation. For many would-be home buyers, a lack of housing affordability creates obstacles to homeownership. This is true for many major cities across the country right now, and we are seeing it within some New Jersey real estate markets as well.
Housing affordability tends to be more of a problem in higher-price markets that also happen to be major population centers. New Jersey cities that fall within the NYC metro area fall into that category. Similar conditions are occurring out west, particularly in places like Seattle and San Francisco.
Mortgage Rates and Home Prices Have Risen in 2018
Nationwide, the monthly mortgage payment for a median-priced home is now roughly $130 higher (per month) than it was at the start of 2018. Rising mortgage rates have something to do with that. During the first week of January 2018, the average rate for a 30-year fixed mortgage loan was 3.95% according to Freddie Mac. As of mid-September, that average had risen to 4.60%.
In New Jersey, home buyers are feeling affordability pressures from rising home values as well. According to Zillow, the ...
In previous blog posts, we’ve explained the real estate closing process in New Jersey and the various costs that home buyers have to pay. Today, we’ll talk about some of the things buyers can do to prepare for closing day. But first, a quick definition is in order.
Definition: You can think of the “closing” as the final step in the home purchasing process. It’s when you will sign all of the finalized documents relating to your mortgage loan and the transfer of the property. It’s also when you’ll receive the keys to your new place.
How to Prepare for Your Closing Day
As a home buyer in New Jersey, there are some steps you can take to help ensure that your closing process goes smoothly. Much of the paperwork will be done by other people, such as a title or escrow professional. But home buyers can be proactive here as well. Here are some steps you can take.
1. Start saving for closing costs and other expenses.
It’s never too early to start putting money aside for your closing costs, and the more you can save the better. Most home buyers in New Jersey have to pay closing costs of some kind when they purchase a house or condo. You’ll receive an estimate of these costs when you apply for a mortgage loan, as well as a finalized list shortly before the scheduled closing day. Getting a head start on the saving process can help ensure that you’ll have the funds needed to close.
2. Try to ...
Once per quarter, the Department of Housing and Urban Development (HUD) sends a report to Congress with details relating to the FHA loan program.
Among other things, this report gives us some insight into the average credit score and debt-to-income ratio for FHA borrowers in New Jersey and elsewhere in the U.S. Here are some highlights from the June 2018 report.
Average Credit Score Among FHA Borrowers in 2018
Credit scores are a three-digit number based on information within a person’s credit reports. Banks and lenders use these and other tools to evaluate loan applicants, and also to determine interest rates. In short, a higher score can help you qualify for a mortgage loan with a good rate.
According to the HUD report, FHA borrowers in New Jersey and nationwide had an average credit score of 670 during the second quarter of 2018.
It’s important to note the distinction between “average” and “minimum” credit scores. The 670 number cited in the report represents the average for all loans originated during that time period. But the minimum score for an FHA loan in New Jersey is significantly lower than that. According to current program guidelines, borrowers can qualify for maximum (96.5%) financing under the FHA loan program as long as they have a credit score of 580 or higher.
In fact, this latest HUD report states: “Share of less than 640 credit score rose to 25.9 percent.” That ...
Home prices in New Jersey have climbed steadily over the last few years, and the general consensus is that they’ll probably continue along that path for the foreseeable future. That means more and more home buyers in New Jersey could turn to jumbo loans to help with their purchases — especially in pricier real estate markets like those within the NYC metro area.
And there’s some good news on this front. According to a recent industry report, access to jumbo loans in New Jersey and nationwide has increased over the past year.
Rising Home Prices, Bigger Mortgage Loans
When home prices rise, so does the size of the average mortgage loan. That’s what we are seeing across the state right now, and across the broader U.S. as well.
The median home value for the state of New Jersey rose by around 8% over the past year or so, according to Zillow. That’s a bigger increase than the national average for the same time period. Looking forward, the company’s economists predict that prices will continue rising for the foreseeable future. In this way, New Jersey mirrors most real estate markets in the country. House values are expected to keep climbing.
So we could see a corresponding increase in the number of New Jersey borrowers using jumbo loans for a home purchase.
Definition: In terms of their size, most mortgage loans can be classified as being either “conforming” or “jumbo.” A ...