NJHMFA Down Payment Assistance Program

On a $280,000 home in Trenton, the city's median price, an HFA Advantage loan through NJHMFA typically needs 3% down, or $8,400. Mercer County buyers get the full $15,000 DPA, so the second loan covers the entire $8,400 down payment and leaves $6,600 for closing costs. The first mortgage would be about $271,600, and the price sits well under Mercer's $566,355 statewide 1-unit limit.

Estimated closing costs in Trenton run $5,500 to $8,500. After the $6,600 left from the DPA, out-of-pocket cash ranges from $0 at the low end to $1,900 at the high end. Ask the seller to pay its customary costs, because DPA funds cannot cover them. Trenton is listed as an Urban Target Area, where a household of three or more can earn up to $195,720.

A first-generation buyer can add the NJHMFA First Generation Homebuyer Program's $7,000, also a five-year forgivable loan. That brings Mercer County assistance to $22,000, which exceeds the estimated $13,900 to $16,900 needed for the down payment and closing costs on this $280,000 home. A buyer counts as first generation if their parents own no residential property, or if they were ever placed in New Jersey foster care.

The NJHMFA Down Payment Assistance Program stacks with the NJHMFA First Generation Homebuyer Program, which adds $7,000 as a separate five-year forgivable loan. Combined assistance reaches $22,000 in Bergen, Essex, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union counties. It reaches $17,000 in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Salem, Sussex and Warren counties. The DPA pairs with three NJHMFA first mortgages: the First-Time Homebuyer Mortgage, the HFA Advantage Mortgage and the Homeward Bound Program.

The DPA cannot be used without an NJHMFA first mortgage, so a buyer who takes an FHA or conventional loan outside the NJHMFA programs loses it. Each borrower can use it only once. It cannot pay seller-customary closing costs or cover a gap when the appraisal comes in below the price. City and county programs set their own layering rules, so confirm any extra assistance with your lender. Call NJHMFA at 1-800-NJ-HOUSE (1-800-654-6873) with questions.

Seller concessions are the other main way to lower cash to close, within FHA, VA, USDA or Freddie Mac limits. Buyers on the HFA Advantage loan whose income falls at or below their county's threshold, such as $111,840 in Mercer or $71,280 in Cumberland, also get lower-cost mortgage insurance. That trims the monthly payment rather than the cash due at closing.

The NJHMFA Down Payment Assistance Program costs nothing if you stay in the home. The $15,000 or $10,000 loan carries 0% interest and no monthly payment, and it is forgiven after five years of owner occupancy. On a 3% down HFA Advantage loan, $15,000 covers the full down payment on a home up to $500,000. Income caps are high, from $134,600 to $216,720 depending on county and household size. First-generation buyers can add $7,000 for $22,000 total, and two-to-four unit homes qualify.

The biggest limitation is the lock-in to an NJHMFA first mortgage from a participating lender, so you cannot shop the whole market for a rate. Selling, refinancing or otherwise conveying the first mortgage within five years ends forgiveness. NJHMFA warns that buyers using the bond-funded First-Time Homebuyer Mortgage may owe a federal recapture tax if they sell within nine years after a large income gain. Nine southern and rural counties get only $10,000. Buyers who need more help should pair it with the NJHMFA First Generation Homebuyer Program.