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 ...
Home loans insured by the Federal Housing Administration (FHA) are one of the most popular financing tools used by first-time home buyers in New Jersey. In fact, a recent report by the Urban Institute revealed that 83% of these loans go to first-timers. This article explains why so many first-time home buyers in New Jersey use FHA loans to finance their purchases.
Report: 83% of FHA Loans Go to First-Time Buyers
During summer 2018, the Washington, D.C.-based Urban Institute published a study that analyzed key mortgage lending trends across the country. Among other things, this report offered some insight into FHA loans and who uses them.
Apparently, a lot of first-time home buyers in New Jersey use the FHA loan program to finance their purchases. Across our state and nationwide, roughly 83% of FHA mortgage originations are for first-time buyers. During the recession, usage among first-timers was at 75%. So it seems that more of these buyers are turning to FHA financing these days.
Definition: The Federal Housing Administration does not lend money directly to borrowers. Instead, it insures the loans made by banks and lenders in the private sector. This insurance gives lenders some protection against default-related losses. It also gives borrowers the benefit of a low down payment and flexible criteria.
Here’s a relevant quote from the August 2018 report:
“The Federal Housing Administration ...
What does the average down payment on a house look like in New Jersey? For those who live in the New York-Newark-Jersey City metro area, the median investment was $50,000 in early 2018.
A report published earlier this year by ATTOM Data Solutions revealed the average down payment on a house in the New York-Newark-Jersey City metropolitan area. Technically it showed the median, which is the midpoint for down payments made by all home buyers included in the study. But that’s the closest we can come to determine the average down payment size.
According to that report, home buyers in the New York-Newark-Jersey City metro area made a median down payment of $50,000 during the first quarter of 2018.
Median Down Payment Among New Jersey Home Buyers
In June 2018, the property data company ATTOM Data Solutions published its “U.S. Residential Property Loan Origination Report” that covered the first quarter of 2018. This report offers insight into a variety of housing trends of interest to home buyers in New Jersey. Among other things, it included down payment data for major cities and metro areas across the country.
According to the Q1 2018 report:
“Other metro areas with median down payments of $50,000 or higher in the first quarter were Naples, Florida ($64,750); Seattle, Washington ($59,800); Boston, Massachusetts ($55,000); and New York-Newark-Jersey City ($50,000).”