08 Apr What programs can help first-time home buyers?

Q. My daughter is planning to buy her first house. Does New Jersey have programs to assist with first time home buyers? What kind of income requirements or limitations are there if there is such a program? As an alternative, in view of the high mortgage rates right now, we thought we could give her the money either as a gift or as loan? Is it allowed? What kind of paperwork will we need? Thanks for your help.
— Mom

A. Congratulations to your daughter on this exciting goal.

There may be help out there for her.

New Jersey has a first-time home buyer’s program that can provide up to $15,000 in downpayment assistance and competitive mortgages for those who qualify, said Claudia Mott, a certified financial planner with Epona Financial Solutions in Basking Ridge.

The New Jersey Housing and Mortgage Finance Agency’s (NJHMFA) First-Time Homebuyer Mortgage Program can be combined with the Down Payment Assistance Program (DPA) to help borrowers secure their first residence, she said.

“There are a number of requirements for borrowers to be eligible including income and home price limitations, residency requirements as well as credit score and debt-to-income inputs,” Mott said. “The property being considered must also meet certain requirements as well.”

For more information about this program or to apply, visit https://nj.gov/dca/hmfa/roadhome

The DPA program is a forgivable loan that has no interest or monthly payments which can be used for a down payment or to cover closing costs, Mott said.

“If the borrower resides in the property continuously for five years from the loan closing date and retains the original mortgage the loan may be forgiven,” she said. “In order to apply for this benefit, the mortgage must be obtained through the NJHMFA program.”

Mott said the mortgage program requires that a NJHMFA participating lender be used to obtain a conventional 30-year, fixed-rate mortgage which can either be government-issued (FHA/VA/USDA) or conventional.

You also mentioned gifting her some money.

There are limitations on how much can be gifted from one individual to another in the course of a year to avoid filing a gift tax return, Mott said.

“For 2024, the amount each person can give to each family member, friend or other individual is $18,000,” she said. “You and your husband could give your daughter a combined $36,000 and not be required to file IRS Form 709. There is no paperwork required when making a qualifying gift that is within the IRS limits.”

Should you decide to loan your daughter the money she needs for her home down payment, it would be wise to draw up a formal intra family loan agreement, which you both sign, to formalize the process and avoid any possible gifting issues with the IRS, Mott said.

“The loan agreement should contain specifics related to the term, repayment schedule, interest rate being charged and amount of regular payment,” she said. “In order to ensure that the loan is in compliance with IRS regulations the interest rate should be at least, if not more than the Applicable Federal Rate (AFR) which is updated each month and can be found at: https://www.irs.gov/applicable-federal-rates.”

The interest rate will be dependent on the repayment period, Mott said.

Email your questions to .

This story was originally published in April 2024.

NJMoneyHelp.com 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.