Help for buying your first home

Photo: jrmike/

 Q. Are there any programs that assist with new home down payments and closing costs? This seems to be the hardest part of buying a home. It seems we have to go broke or have about $15,000 at the ready to purchase a home.

A. Finding the cash for a down payment on a first home can be tough.

Depending on your circumstances, you might find some help, or, you may decide it’s better to wait.

If you haven’t owned a house in the last three years, you are considered a first time home buyer and are eligible for the First-Time Homebuyer Program funded by NJHMFA — the New Jersey Housing and Mortgage Finance Agency, said Alan Meckler, a certified financial planner with Cornerstone Financial Group in Succasunna .

“This unique, first-time home buyer loan offers a below-market, fixed interest rate to those who can apply. It will even help with your down payment,” he said.

Meckler said through the program, you can get 2, 3, or even 4 percent towards your down payment and/or closing costs, and he said there is no monthly payment or interest rate on the loan. And if you’re in what’s called a “Smart Growth Area,” single family units and condos are eligible, while two-to-four family homes must be in existence for five years

At the time this story was written, NJHMFA’s First-Time Homebuyer interest rate was 4.50 percent with zero points on a 30-year, fixed-rate mortgage.

“Down payments of as little as 3.5 percent are required and must come from the borrower’s own assets,” Meckler said. “Certain closing costs can be gifted by family members, non-profit organizations or government agencies.”

Also, the program allows debt-to-income ratios as high as 33 percent (for housing debt, such as mortgage, taxes and insurance) and up to 38 percent for the total monthly debt load.

But before you jump in to buy, there’s a hitch. If you’re having difficulty coming up with the funds for a down payment and closing costs, it might be a good indication that you are not yet financially ready to own your own home, said Sheri Iannetta Cupo, a certified financial planner with SageBroadview in Morristown. Or, the home may be more expensive than makes sense based on your income and net worth, even if you were approved for a mortgage.

“The magnitude of the carrying costs of owning of home are often a big surprise to former renters,” Cupo said. “I know they were to my husband and me when we bought our first home.”

She said there are always unexpected costs when you own.

For example, instead of taking that nice vacation, you may need to stay home so you can replace the roof that was supposed to last for five more years but did not, she said.

She also said there’s an opportunity cost when you sink a down payment into a home.

Ask yourself: What else might you have done with these funds? And what about the opportunity cost associated with the carrying costs? Will the costs of home ownership prevent you from travelling to visit family and friends? Sending your children to a better school? Force you to stay in a job you hate in order to swing the payments?

Before you take the plunge, play with some rent vs. own online calculators to make sure you understand all the numbers, and good luck!

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This story was first posted in December 2014. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.