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The real estate escrow process in New Jersey is something that generates a lot of questions (and sometimes confusion) among home buyers. This is especially true for first-time buyers who have never navigated the process before.
Today, we’ll look at some of the steps that occur during the escrow process in New Jersey, as well as covering some important terminology.
The Escrow Process for New Jersey Home Buyers
In a real estate context, “escrow” refers to the period of time in between the purchase offer and the final closing. During this process, funds are collected and documents are prepared to finalize the sale of the home.
We will talk more about the process in a moment. But first, a quick definition:
Escrow is a broad term that can mean several different things. It can refer to a process, as well as the money and documents collected during that process. An official definition of escrow is “an item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition.” In a real estate transaction, this can refer to money deposited by the buyer as part of the purchase offer, as well as documents relating to the sale of the home.
You can think of the escrow process in New Jersey as an intermediate step during the home buying process. In a typical transaction, a buyer will provide an earnest money deposit to show the seller that they are ...
Home buyers in New Jersey tend to have a lot of questions about the mortgage application, processing and closing process. In particular, many buyers want to know about the mortgage documents that are needed in New Jersey.
The list of required documents can vary based on the type of home loan you are using and other factors. With that being said, there are certain mortgage documents that are required for most home-buying scenarios. They are explained below.
Mortgage Application and Closing Documents in New Jersey
When you apply for a mortgage loan in New Jersey, you will be asked for a variety of documents relating to your finances. Here are some of the “usual items” that are required during the mortgage application, underwriting, and closing process in New Jersey.
- Bank statements for the last few months, for accounts the borrower holds. If more than one person will be named on the mortgage loan, they will each have to provide banking documents.
- Tax returns for the last year or two. These documents can be sent straight to the mortgage company from the IRS. The home buyer typically completes IRS form 4506-T (Request for Transcript of Tax Return), which enables this to happen.
- Recent pay stubs showing year-to-date earnings.
- Name and contact information for the borrower’s employer, and possibly previous employers as well.
- Most recent statements ...
How much house can I afford to buy in New Jersey, when using a mortgage loan?
This is one of the most common questions among home buyers in the state. Here are some things to keep in mind when establishing a budget and shopping for a home in New Jersey.
How Much House Can You Afford in New Jersey?
There are several factors to consider when deciding how much house you can afford to buy. For most buyers, mortgage financing plays an important role here. So the size of the loan you qualify for can obviously influence how much house you can buy. And that brings up the debt-to-income ratio.
Banks and mortgage companies use something known as the debt-to-income ratio, or DTI, as one of the factors in determining how much a person can borrow. So this ratio can affect your buying power as well.
Many financial advisors recommend that a person’s total debt payments (including the mortgage loan and all other recurring debts) should be no higher than 36% of gross income. But this is just a general rule doesn’t apply to all situations. Some people are capable of managing a higher level of debt.
That’s why most mortgage programs available in New Jersey today set the bar somewhere around 43%, for the total debt-to-income ratio — or even 50% in some cases.
Loan Limits Play a Role As Well
Your borrowing capacity could also be affected by the maximum size limits for the mortgage program you ...
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 ...