Robert CostantinoSenior Loan Officer NMLS#: 242568
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This is the second in a two-part tutorial that explains the different types of mortgage loans in New Jersey. Last time, we looked at the differences between fixed and adjustable-rate mortgages. This article explains the key differences between FHA and conventional home loans in New Jersey.
The primary difference between conventional and FHA loans has to do with insurance backing:
- FHA loans are insured by the government, through the Federal Housing Administration. This insurance protects mortgage lenders from losses resulting from borrower default. But the government backing benefits borrowers as well, as we will discuss in a moment.
- Conventional loans are originated (and sometimes insured) solely within the private sector. Unlike FHA loans, the government does not insure or guarantee these mortgage products against losses. So you can think of a New Jersey conventional loan as a “non-government-backed” mortgage option.
Advantages of FHA Home Loans in New Jersey
The FHA loan program is managed by the Department of Housing and Urban Development (HUD). According to current HUD guidelines, borrowers who use this mortgage program can make a down payment as low as 3.5% of the purchase price or the appraised value.
This is one of the primary advantages to using an FHA loan when buying a house in New Jersey. It allows you to make a relatively low down payment / ...
For a lot of New Jersey home buyers, the down payment can be the biggest hurdle to buying a home. But it might only be a perceived hurdle. The truth is there are several mortgage programs available in New Jersey that offer low down-payment requirements.
Additionally, borrowers might be able to obtain gift money from a family member or borrower from a 401k. Those are just some of the ways you could buy a home in New Jersey with little to no money down.
Buying a Home With Little Money Down, Using FHA
House prices across New Jersey have risen steadily over the last few years. According to the real estate information service Zillow, the median home value for the state rose 5% over the last 12 months alone (ending in October 2017).
As a result, many home buyers in New Jersey are seeking ways to reduce their upfront, out-of-pocket expenses when buying a house. Some prefer to buy a house in New Jersey with little to no money down. Here’s how you might accomplish that goal.
Despite common misconceptions, you don’t necessarily need a down payment of 20% or more when buying a house in New Jersey. There are mortgage loans available that offer a much lower upfront investment.
The FHA loan program is one of those financing strategies that offers a low down payment. The Department of Housing and Urban Development (HUD), which manages this particular mortgage program, allows borrowers to make a down payment as low as ...
Home buyers in more expensive real estate markets, like some in New Jersey, often have to use jumbo mortgage loans when buying a house. Which begs the question: What is considered a jumbo loan in New Jersey? What’s the threshold or limit?
Depending on the county where you plan to buy a home, a jumbo loan might be anything above $424,100 or $636,150. See the next section for a county-by-county breakdown.
What Is a Jumbo Loan in New Jersey?
By definition, a jumbo loan is when the amount being borrowed exceeds the conforming loan limits used by Fannie Mae and Freddie Mac. These limits are established by the Federal Housing Finance Agency (FHFA0, which regulates Fannie and Freddie.
Loan limits are based on median home values, which means they can vary from one county and region to the next. When a person borrows more than these limits, it is considered to be a jumbo mortgage product.
So let’s get specific. What is considered a jumbo loan in New Jersey? Depending on where you live, the conforming limit for your county is either $424,100 for $636,150 (as of 2017). So a jumbo mortgage would be anything above those amounts. These are referred to as the “floor” and “ceiling” limits.
Here’s how it breaks down by county:
- Floor areas: The conforming loan limit is $424,100 in the following counties: Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer, Salem and ...
This might come as a surprise to many borrowers. The latest industry reports showed that jumbo loan rates in New Jersey and nationwide were lower, on average, than the rates for smaller conforming mortgage loans.
In New Jersey’s pricier real estate markets, like those within the New York City metropolitan area, home buyers often have to use jumbo mortgage loans to finance their purchases. A jumbo loan is one that exceeds the conforming loan limits established by the Federal Housing Finance Agency.
Because there’s a higher amount being borrowed, you might think jumbo loan rates in New Jersey would automatically be higher than those assigned to smaller loans. But that’s not always the case. In fact, the opposite is frequently true.
New Jersey Jumbo Loan Rates Lower Than Conforming?
For many years, jumbo loans did in fact have higher average mortgage rates than their smaller conforming counterparts. But we saw a reversal of that trend a few years ago.
The latest Weekly Application Survey conducted by the MBA revealed a continuation of this seemingly counterintuitive trend. Mortgage rates for jumbo loans in New Jersey and nationwide were once again lower than the average rates assigned to smaller conforming loans.
Here are some trends identified in the MBA’s report from October 25, 2017:
- Conforming: The average mortgage interest rate assigned to 30-year fixed home loans ...
We receive quite a few questions about interest-only mortgage loans in New Jersey, and in particular jumbo mortgage loans with an interest-only payment structure. So we thought it would be helpful to publish and explain this topic. Here’s what you should know about interest-only jumbo mortgage loans in New Jersey.
Interest-Only Jumbo Loans: How it All Works
Interest-only home loans can be either conforming or jumbo. These terms relate to the size of the mortgage in relation to pre-established limits or “caps.” This will all make more sense if we cover some basic terminology.
Interest-only mortgage: As the name suggests, an interest-only mortgage loan is one where the borrower pays only interest for a specific period of time. During this time, the principal balance remains the same. While these products can vary in their structure, most have an interest-only period lasting from five to ten years. After that, the borrower would begin to make payments toward the principal as well as the interest. So the monthly payments would increase in size.
Jumbo mortgage loan: A jumbo or “non-conforming” home loan is one that exceeds the conforming limits set by the Federal Housing Finance Agency. A conforming loan is one that adheres to these limits and can therefore be sold to Fannie Mae and Freddie Mac. A jumbo loan exceeds these limits and generally cannot be sold to Fannie or ...