You have saved the 10%. You have found the house of your dreams. Now what do you do?
In 2023, the mortgage application process is as perplexing as ever, especially if you are a first-time buyer. It seems that whether you are applying for an interest-only mortgage, or a fixed-rate one, the paperwork and stress are endless.
Of course, the process of getting your first home doesn’t have to be all doom and gloom. The process is a lot simpler now than it was in the 1990s, with more mortgage lenders being able to pre-approve applicants online without any detrimental effects on your credit score.
Particularities you should be aware of when applying for a mortgage in New Jersey
- Property Taxes: New Jersey has some of the highest property tax rates in the nation. Consider this when determining your budget, as it will affect your overall monthly mortgage payment.
- Flood Zones: New Jersey has many coastal areas, and if the property you’re considering is in a flood zone, you may be required to carry flood insurance in addition to your homeowner’s insurance. This would increase your overall housing costs.
- New Jersey Housing and Mortgage Finance Agency (NJHMFA): If you’re a first-time homebuyer, you may be able to get assistance from the NJHMFA, which offers programs designed to make homeownership more affordable.
- Local Lender Knowledge: Choosing a local lender who is familiar with the specificities of the New Jersey real estate market might be advantageous. They can help navigate you through the process and might be more responsive to your needs.
- State Laws on Foreclosure: New Jersey is a judicial foreclosure state, which means that if a borrower defaults on their mortgage, the lender must go through the courts to repossess the property. This offers some additional protections to the borrower, but it also means that foreclosures can take a long time to process.
- Real Estate Transfer Fee: In New Jersey, a fee is charged by the state or local government to transfer the title of the property from the seller to the buyer. Usually, the seller pays this fee, but it may be a point of negotiation in the sale process.
Tips to ensure the process is successful
Applying for a fixed-rate mortgage in New Jersey involves several steps, and the specific details can vary depending on your personal circumstances and the lender you choose.
Look At Your Credit Score
It is something that most adults should have, but unless you are applying for a house, it may feel like it is a bit pointless; a credit score.
Before you begin the application process for a mortgage, it’s important to review your credit score and financial health. Why? Because independent mortgage providers and banks will look at credit scores to assess your trustworthiness. After all, you are applying for a loan from them, and it will not be in their interest to give a loan to someone who has a bad credit history.
You can aim for a good credit score by regularly paying your credit care and energy supplier bills on time, reducing outstanding debt, and correcting any errors on your credit report.
It may be the case that you have recently finished paying off a debt management plan (or DMP), which will stay on your credit score for six years, even though you are now debt-free. Following the COVID pandemic of 2020, many people applied for DMPs due to reasons that were outside of their control, so more New Jersey mortgage lenders are happy to discuss mortgages with those who have these on their credit report. Just be sure to search for the right lender.
Research and Compare
Of course, as soon as word gets out online via your searches on Google that you are looking for a mortgage, you will be bombarded with emails from different providers.
Aim to carefully explore different mortgage lenders and compare their offerings, interest rates, terms, and customer reviews. It is important for the future of your home and your mortgage to choose reputable lenders with competitive rates and favorable terms that suit your financial goals. Consult with friends, family, or a financial advisor to get recommendations and insights into lenders’ reputations.
It is also worth looking at independent review sites, as company sites from mortgage providers are bound to paint them in a glowing light. So, be careful!
It is best to do a rehearsal before jumping into the opening night! Obtaining a pre-approval letter from a mortgage provider strengthens your position as a buyer and demonstrates your seriousness to those who can provide you with a loan of this size.
Pre-approval involves submitting detailed financial information to a mortgage lender, like a bank, who assesses your creditworthiness and determines the maximum mortgage amount you qualify for. This can help mortgage providers see exactly what they are dealing with in financial terms, as well as highlight any potential risks to them. Plus, it really speeds the whole process up!
Gather Necessary Documentation
To apply for a mortgage, irrespective of the type, you’ll need to gather and organize various documents, including income statements (such as pay stubs, tax returns, and W-2 forms), bank statements, employment history, identification documents, and proof of assets or liabilities.
If you are self-employed or a sole trader and are applying for a mortgage, make sure you have a copy of your tax returns from the last 4-5 years, as this will show how much money was coming into your company, as well as how much tax you paid.
Complete the Application
Now, for the big step, it is time to complete the application! Nerve-wracking!
Once you’ve selected your mortgage lender, you should aim to complete the mortgage application accurately and thoroughly; this can be tricky, so it may be worth hiring a lawyer or mortgage advisor to help you with this step. Provide all of the requested documentation promptly and review the terms and conditions of the mortgage agreement, paying close attention to the interest rate, loan duration, monthly payments, any associated fees, and prepayment penalties, if applicable. If you have any questions for the mortgage lender, don’t be afraid to ask!