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A Look At mortgage options in Today's market
NEW JERSEY - Navigating through the often complex process of obtaining a home mortgage can seem to be one of the most daunting parts of buying a home, especially in these challenging economic times. However, New Jersey residents are now proactively evaluating the effect of economic changes, weighing their mortgage options and exploring assistance programs before they have even begun the search for a home.
New Jersey's Lending Climate
For the past several months, news headlines on high foreclosure rates nationwide have dominated the media. Most of these foreclosures were a result of subprime mortgage lending loans, typically granted to individuals with poor credit histories who, as a result of their deficient credit ratings, would not be able to qualify for conventional mortgages. According to recent statements from New Jersey Banking and Insurance Commissioner Steven Goldman, subprime mortgages represent about 10.5 percent of all loans in New Jersey, while nationally, subprime mortgages represent about 12.2 percent of all loans. In the second quarter of this year, New Jersey had a 17.1 percent delinquent rate of those subprime loans, while nationally, the delinquency rate was 18.2 percent. While current conditions have lead to more home foreclosures and tighter financing guidelines, there are still lending options available to consumers on sound fiscal footing. New Jersey home buyers, in good financial standing, can take advantage of historically low interest rates, increased loan limits from the Federal Housing Administration (FHA) and statewide mortgage assistance programs.
"There is no question that the process is different than it was two years ago. Purchasing a home may now take a little longer, and buyers may have to fill out more paperwork, but it is not an impossible task, especially for those who are well qualified," said 2008 NJAR® President Drew Fishman, CRS. "Researching all your options may take time, but in the end, homeownership has a lot of advantages, including many tax benefits."
Marijohn Mazza, a recent home buyer from Spotswood, commented on her experience obtaining a mortgage. "For me, it was a very smooth process, and it turned out where my mortgage payment was actually lower than my rent," said Mazza.
Shopping For the Right Mortgage
With many different types of loans and lenders out there, education is the best way to begin the process of obtaining a mortgage, even before a property has been selected. There are Web sites, seminars, financial planners, realtors and mortgage professionals available to help buyers understand the details of obtaining a mortgage. Buyers can calculate their future mortgage payments through the Web site, http://finance.realtor.com/homefinance/, but should also consider related insurance, taxes, homeowner association fees and other costs rolled into the mortgage payment. Buyers should also compare different sources for mortgages such as direct lenders and mortgage brokers, but when comparing loans between lenders, buyers should take into account more than interest rates. Consumers should also be aware of additional costs such as points, origination charges, administration fees, commitment fees and other processing and closing fees; they could affect how much the loan really costs you.
"Realtors are a wealth of knowledge and may be able to guide consumers to reliable financing institutions and help walk them through their lending options. In the end, it is always best to read over all paperwork carefully and seek out legal advice if necessary to ensure you understand what you're signing will really pay off in the long run. In these times, buyers can't afford to make hasty, uninformed decisions because every penny counts," added Fishman.
Eric Bonham, of Blackwood, maintained an open dialogue with his realtor and mortgage company when he recently purchased his home with his girlfriend. "When we found the house, our next call was to the mortgage company to make sure it was in our price range. Our realtor and loan provider remained in constant contact, keeping us up to speed on the next steps," said Bonham.
Exploring Assistance Programs
Buyers, especially those purchasing a home for the first time, should also explore state and federal assistance programs with their realtor, mortgage lender or broker. As of July, the Housing and Economic Recovery Act created a new, temporary tax credit to provide an incentive for first-time home buyers. The $7,500 credit will be available for the purchase of principal residences on or after April 9 and before July 1, 2009. The New Jersey Housing and Mortgage Finance Agency (HMFA) also provides a variety of programs and services that can be used by prospective buyers. For example, Live Where You Work (LWYW) is a home mortgage incentive program that provides low-interest mortgage loans to home buyers purchasing homes in towns where they are employed. The Smart Start Program is also available to participants in HMFA's first mortgage home buyer's program for those purchasing homes in Smart Growth areas, which helps families by offering a second mortgage for down payment and/or closing costs up to four percent.
Kerri Kushner recently utilized a mortgage assistance program when she bought a home in Old Bridge. "Everyone is really surprised that there are programs out there like the Smart Start program, which is what enabled me to purchase a home. It's great, especially for first-time buyers, to have help in this area and will hopefully get more people excited about buying."
NJAR® is encouraging New Jersey residents to Get the REAL Story on real estate in New Jersey with a public education campaign that features an informational Web site and advertising campaign that also features real stories from recent buyers and sellers. For more information on the campaign or simply to Get the REAL Story on real estate in New Jersey, visit www.REALstoryNJ.com.
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