Real Estate Finance, Mortgages and New Jersey Housing Finance Programs
Loan structures
Conventional, FHA (government-insured, mortgage insurance premium, lower down payment), VA (guaranty, certificate of eligibility), and USDA programs each carry distinct underwriting. Fixed-rate loans have one rate; adjustable-rate loans have initial, periodic, and lifetime caps. Lenders evaluate LTV, credit, and debt-to-income ratio, and typically escrow taxes and insurance as part of PITI.
Points and disclosures
One discount point equals 1% of the loan amount and is prepaid interest that buys down the rate; an origination fee pays the lender for making the loan. Under TRID, the Loan Estimate goes out within three business days of application and the Closing Disclosure at least three business days before consummation. RESPA Section 8 prohibits fees for referral of settlement business. The three-day right of rescission applies to refinances and home equity lines, not to a purchase-money mortgage.
New Jersey programs
The New Jersey Housing and Mortgage Finance Agency (NJHMFA) offers first-time and repeat homebuyer mortgage programs with below-market rates, down payment and closing cost assistance often structured as a subordinate loan, and targeted urban and workforce initiatives. Confirm current program terms, income limits, and recapture tax provisions before advising a client.
Traps
- Confusing a mortgage broker with a real estate broker; loan originators are licensed by the Department of Banking and Insurance.
- Treating preapproval as a commitment to lend.
- Assuming seller-paid points reduce the price rather than the buyer's rate.
Worked example
A $400,000 loan with 2 discount points costs $8,000 at closing. Rule of thumb: one point typically reduces the interest rate by roughly 0.25%, so the buyer must weigh the upfront cost against the monthly savings and expected holding period.