NJ's Down Payment Assistance Program Explained

Written by Dominic Rosato | NJ Realtor® with Compass Real Estate

Introduction

Becoming a homeowner is a dream for many, but the path to homeownership can often seem daunting, especially for first-time buyers in the great state of New Jersey. Recognizing this, the New Jersey Housing and Mortgage Finance Agency (NJHMFA) has established a program tailored to support first-time homebuyers (and non-first time buyers) in their journey towards owning a home in New Jersey. It’s simple and straightforward - I’ve been recommending it to my clients from the moment it was introduced. Allow me to elaborate!

NJHMFA Program Overview

The NJHMFA's First-Time Homebuyer Mortgage Program offers a competitive 30-year fixed-rate government-insured loan to eligible homebuyers purchasing a home in New Jersey. Examples of NJHMFA loans include conventional, FHA, and VA, and they are offered by thousands of lenders throughout the state. These loans can THEN be combined with the Down Payment Assistance Program (DPA), which is where things start to get interesting.

Down Payment Assistance (DPA)

The DPA offers qualified homebuyers up to $15,000 towards down payment and/or closing costs, depending on the county where the property is located. On top of that, if you are a first-generation homebuyer, you can receive an additional $7,000, totaling $22,000 in assistance. Notably, this assistance comes in the form of a forgivable loan with no interest and no monthly payments, provided the borrower meets the criteria. The loan will be forgiven so long as the borrower lives in the residence for at least 5 years and does not refinance or convey the first mortgage.

(Via njhousing.gov)

Eligibility Criteria

To qualify for these programs, borrowers must meet certain criteria:

• - Residency: Borrowers must purchase and occupy a residential home in New Jersey within 60 days of closing.
• - First-time Homebuyer Status: Individuals who haven't owned a primary residence in the previous three years are considered first-time homebuyers.
• - Income: There are various levels of maximum income requirements based on the municipality of the home (see the charts below).
• - Property Type: Eligible properties include single-family homes, condominiums, townhomes, manufactured or mobile homes, and two- to four-family dwelling units.
• - Credit Score and Debt-to-Income: Borrowers must still meet the credit score and debt-to-income requirements of the bank.

Urban Target Areas (UTAs)

Urban target areas are municipalities that the government wants to see more housing development occur in. Because of that, they are offering more flexible criteria for Down Payment Assistance in these zones. The main benefits of buying in a UTA include:

• - Borrowers can have a higher income and still qualify for DPA (see charts below)
• - Borrowers of homes located within Urban Target Areas (or Qualified Veterans) do NOT need to be first time homebuyers to qualify for DPA, however they cannot own another primary residence at the time of closing.

As of August of 2023, the following areas are identified as UTAs:

• Atlantic: Atlantic City, Hamilton Twp., Somers Point
• Bergen: Garfield, Hackensack
• Burlington: Maple Shade, Mount Holly, Southampton
• Camden: Camden, Lindenwold, Pennsauken
• Cape May: Woodbine, Lower Township, Middle Township
• Cumberland: Commercial Township, Downe, Bridgeton, Millville, Vineland
• Essex: Newark, East Orange, Irvington, Montclair, West Orange,City of Orange Twp.
• Hudson: Jersey City, Bayonne, Kearny Town, Harrison Town, North Bergen,
• Guttenberg Town, West New York, Union City, Hoboken, West New York
• Mercer: Trenton
• Middlesex: Perth Amboy, New Brunswick, Old Bridge, Edison, Woodbridge
• Monmouth: Red Bank, Long Branch, Asbury Park, Neptune Twp., Freehold
• Morris: Morristown, Victory Gardens
• Ocean: Lakewood, Manchester Twp., Berkeley Twp.
• Passaic: Clifton, Passaic, Paterson
• Salem: Penns Grove, Salem City
• Union: Elizabeth, Plainfield
• Warren: Phillipsburg

(Via njhousing.gov)

(Via njhousing.gov)

How to Apply

Talk to your real estate agent! Prospective buyers should contact a local real estate agent or lender who is familiar with first-time home buyers and the NJHMFA program. From there, the agent and lender will then guide them through the application process, providing assistance and support at every step.

Conclusion

For homebuyers in New Jersey, the NJHMFA's First-Time Homebuyer Program presents an incredibly valuable opportunity to turn their homeownership dreams into reality. With financial assistance, competitive loan terms, and dedicated support, this program aims to make the journey to homeownership a smooth and achievable one. To learn more and take the first step towards owning a home in New Jersey, I encourage you to reach out to myself or another real estate agent that specializes in helping first time home buyers achieve home ownership. I work primarily in Northern NJ, but am happy to answer any questions you may have. Best of luck!