Are you ready to buy a house in New Jersey? Buying a home has always been the American dream. But many people think it is way out of their reach simply because they are considered low income. Maybe that was true to some extent years ago, but not today. So don’t give up hope: you can buy a house if you take the right steps. To help you achieve your dream, we offer these tips on how to buy a house in New Jersey if you are considered low income.
Bolster Your Mortgage Application (Especially Credit)
Many people aren’t aware that income isn’t the main consideration when it comes to underwriting criteria. More important to lenders is your credit. So to help you buy a house New Jersey, bolster your application by improving your credit.
Today, credit scores are used for a host of different money-related concerns, including employment, borrowing, insurance, utilities, and more. So addressing your credit will benefit you on many counts. A credit score can range from 300 to 850, and the higher yours is, the more opportunities open up for you.
The factors that play a part in determining your credit score include the following:
- Payment history (especially timeliness)
- Credit usage and availability
- Length of time for established credit
- Number and kinds of credit accounts
- Number of recent inquiries about your credit score
Improving your credit in these areas will make your application stronger even with low income.
And be sure to check your credit report for errors that can lower your score and address them. Such errors are more common than people think.
Set Up a Budget and Save for the Down Payment
The next step to help you buy a house in New Jersey with low income is to set up and implement a monthly budget. Living within a monthly budget will help you determine how large a monthly mortgage payment you can comfortably handle.
In addition, it will help you begin paying down existing debt to achieve abetter debt-to-income ratio. Typically, lenders will allow a debt-to-income ratio of up to 36%. Lenders use this ratio to determine minimum monthly mortgage payments. But you will also need to include in your projected home-ownership budget the many other associated costs, such as insurance, property taxes, repairs/maintenance, private mortgage insurance, and the like.
And within your budget, you need to allow room to begin saving for the down payment to buy a house in New Jersey – which is the largest upfront cost in buying a house. But you don’t have to save as much as you used to. Today, there a many low down payment options available for lower-income homebuyers. (Contact your local agent at855-966-DEAL to find out more about these programs.)
Look Into Low Income Mortgage Loans
And don’t forget to look into low-income mortgage loans, those specifically designed to help low- and moderate-income people realize their dream of becoming homeowners. If you have decent credit is possible to buy a house in New Jersey.
The advantages of these programs include:
- Competitive interest rates
- Affordable mortgage payments
- Low (sometimes no) down payments
- Down payment assistance
One of the most popular and most utilized of these low-income mortgages is the FHA loan. A Federal Housing Administration (FHA) loan makes it possible for lower-income buyers to buy a house with much less stringent standards than traditional mortgages.
Your credit score, for example, can be as low as 500 in some cases. And with a credit score above 580, lenders may accept a debt-to-income ratio of as much as 45%. In addition, with an FHA loan, you may have to pay only 3.5% down – which is much more doable for lower-income people than the traditional 20%.
So can you buy a house if you are considered low income? The answer is a resounding “Yes!” But it will take some research and some knowledge of how to do it. And that’s where your local real estate becomes such a valuable resource. So if you’re considered low income and you’re ready to buy a house in New Jersey, contact us today at 855-966-DEAL.