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Mortgage Basics

The first step you must take to qualify for a mortgage in New Jersey is to ascertain the size of loan your income and credit history qualify for. Once you are able to determine the size of loan you can access, you will be able to determine the cost of homes you can conveniently afford.

Qualifying for a mortgage in New Jersey

As a first time home buyer in New Jersey, the most important step you must take is to determine if you are qualified for a home buyer loan.

  • You can pre-qualify by checking how much you can comfortably afford by getting an instant rate quote.

  • A credit report will be carried out to ascertain your credit worthiness and credit score.

  • Your real estate agent should consider your income, credits to assets, debt, the loans that are most suitable to you, and the best payment option for you.

Getting prepared for your home purchase

You must have a certain amount of raw cash to be able to make a home purchase. Your real estate agent will assist you to determine how much is required to take care of the down payments, fees and the closing costs for your home purchase. Some of these fees are: evaluation fees, loan fees, inspection fees, legal services fees, as well as the title search fees.

Important mortgage terms you should be conversant with:

  • Housing Ratio

This refers to your overall housing expenditure (principal, interest, insurance, tax, and condo/homeowner dues).

  • Debt Ratio

This refers to your overall housing expenditure in addition to the monthly payments of your revolving debts and installments. This will involve things like child support, separation or alimony maintenance. Retail deferred payments and student loans do not apply here.

  • Loan-to-Value( LTV)

This refers to the loan amount of the appraised value or purchase price in percentage, depending on which is less. For instance, if you pay a down payment of$15, 000 for a $150, 000 home, you will have 90% LTV. Loans with LTV above 80% always require Private Mortgage Insurance or you will have to combine your first and second mortgage to avoid the Private Mortgage Insurance.

How Much Down Payment Can You Afford?

The first time home buyer loan you will be eligible for will be determined by your income and credit history. However, you will need some cash to cover the three things outlined below:

1. Your Down Payment

This is the initial amount of cash you need to pay for your home.

2. Closing Costs

This is the amount of money you will require to take care of your non-recurring or one-time closing costs, in addition to your recurring closing costs.

3. Reserves

You must have more than $10 left in your bank account after you make your down payment. You will need to present 2 months PITI of your overall monthly housing costs in reserve.

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