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Not all New Jersey FHA lenders have the same mortgage lending requirement on FHA loans. Many homebuyers are perplexed when shopping for a mortgage to purchase a home. FHA loans are the most popular mortgage loan program for first-time homebuyers with little to no credit established, borrowers with prior bad credit, or homebuyers with a high debt-to-income ratio.

In the following paragraphs, we will cover New Jersey FHA lenders with no lender overlays. Not all mortgage lenders have the same FHA mortgage lending requirements. Some New Jersey FHA lenders have higher lending requirements than other mortgage companies.

What Is The Role of HUD on FHA Loans?

The U.S. Department of Housing and Urban Development (HUD) is the Federal Housing Administration (FHA) parent. HUD is a large federal government agency that administers FHA loans. The mission of HUD is to promote hard-working American families to realize the dream of homeownership becoming a reality with little down payment and less-than-perfect credit.

HUD has helped millions of American families become homeowners by making FHA loans easy to qualify for without much red tape. There are several FHA loan programs for homebuyers and homeowners. We will be covering HUD’s mortgage loan requirements on FHA loans.

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

What Is The Role Of HUD and FHA Lenders?

HUD-approved banks and mortgage lenders originate and fund FHA loans. HUD’s role is to insure FHA loans originated and funded by mortgage lenders in the event homeowners default on their FHA loans.

When borrowers default on FHA loans, the loss the lender takes is partially covered by HUD as long as the lender has followed the HUD 4000.1 FHA Handbook On FHA Loans. The HUD 4000.1 FHA Handbook is a comprehensive list of HUD agency mortgage guidelines that consists of 1,000 pages.

Types of FHA Loans In New Jersey

FHA loans are often referred to as government-backed loans. There are three government-backed loans:

• FHA loans
• VA loans
• USDA loans

USDA loans are only available for homes that the USDA Rural Development designates as eligible USDA rural areas. VA loans are only for active and retired veterans of the U.S. Armed Services with a VA certificate of eligibility.

What Are FHA Loans?

FHA loans are called government-backed loans because if borrowers default and foreclose on their home loans, HUD, the parent of FHA, will partially guarantee the loss to the mortgage lender. This is why FHA loans are referred to as government-backed mortgages.

There are several types of FHA loan programs. FHA mortgages are for owner-occupant homes only. Second homes and investment properties are not eligible for FHA loans.

Types of FHA Mortgage Loan Options

Here are the FHA loan programs available to American homebuyers and homeowners:

• Home Purchase
• Home Refinance
• FHA streamlines refinance mortgages
• FHA cash-out refinance mortgages
• Standard and Streamline FHA 203k Renovation Loans
• FHA Reverse Mortgages for Senior Homeowners

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

Understanding Lender Overlays Imposed By New Jersey FHA Lenders

If you plan on using FHA loans to purchase a home in New Jersey, you need to realize that not all New Jersey FHA lenders have the same lending requirements and guidelines. Many home buyers are under the assumption since FHA loans are government-backed mortgages by HUD, all New Jersey FHA lenders will have the same lending requirements on FHA loans. This is not true.

New Jersey FHA lenders must meet the minimum agency mortgage guidelines set by the U.S. Housing and Urban Development (HUD). HUD is the parent of FHA and is the federal agency that creates and implements the minimum agency lending requirements of FHA loans in New Jersey. However, each individual mortgage company in New Jersey can have higher lending requirements that are above and beyond the HUD minimum agency mortgage guidelines called lender overlays.

Why Are FHA Loans The Home Loan of Choice In New Jersey

Most New Jersey homebuyers choose FHA loans as their mortgage loan of choice. FHA loans are very popular for first-time homebuyers, borrowers with prior bad credit, borrowers with credit scores down to 500 FICO, homebuyers who need a manual underwrite, borrowers who are in Chapter 13 Bankruptcy repayment plan, and borrowers with credit issues or income irregularities.

It is substantially easier for borrowers with little to no credit or bad credit to get an approve/eligible per automated underwriting system on an FHA loan than any other loan program. HUD has higher debt-to-income ratio caps versus conventional loans. FHA and VA loans are the nation’s only two loan programs that allow manual underwriting. Borrowers who cannot get approve/eligible per the automated underwriting system and get a refer/eligible per AUS can qualify for an FHA loan.

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

FHA Loans In New Jersey For Recent College Graduates With Little To No Credit Tradelines

HUD allows first-time homebuyers who are recent college graduates with no credit scores. Lenders can allow recent college graduates with no credit scores with non-traditional credit and a manual underwrite. Borrowers with large outstanding collections and/or charged-off accounts do not have to pay them off to qualify for an FHA loan. The key to getting an approve/eligible per automated underwriting system is to have been timely with all of your payments in the past 12 months.

How Can You Qualify For FHA Loans With Bad Credit In New Jersey?

HUD understands people can go through financial difficulties due to unemployment, loss of business, extended illness, divorce, loss of business, or other extenuating circumstances.

People often recover. To be eligible for an FHA loan, mortgage loan applicants must have rebuilt and re-established their credit and income profile after periods of bad credit. They must have been timely on their payments for the past 12 months. Timely payments in the past 12 months after bad credit show financial responsibility and the ability to repay their new mortgage loan payments.

Do All New Jersey FHA Lenders Have The Same Lending Requirements On FHA Loans?

New Jersey FHA lenders can have lender overlays on just about anything. Not all New Jersey FHA lenders have the same lender overlays. Some lenders may have higher credit score requirements than other companies. Some New Jersey FHA lenders may have lender overlays on collections and charged-off accounts, while others may not.

Understanding the minimum agency mortgage guidelines is very important for borrowers with less-than-perfect credit or lower credit scores. Not all New Jersey FHA lenders can do loans that HUD allows.

FHA Credit Score Versus Down Payment Requirements

The minimum credit score requirement for a homebuyer to qualify for a 3.5% down payment is 580 FICO. Most New Jersey FHA lenders require a 620 credit score or higher for borrowers on a 3.5% down payment FHA loan, even though HUD’s minimum credit score requirement is 580 FICO.

The higher lending requirement by lenders is called lender overlays on FHA loans. HUD allows home buyers with credit scores as low as 500 FICO to get approved for FHA loans. In the next paragraph, we will discuss qualifying for an FHA loan in New Jersey with credit scores as low as 500.

FHA Loans In New Jersey With Credit Scores Down To 500 FICO

HUD allows borrowers with credit scores down to a 500 FICO to qualify for an FHA loan in New Jersey as long as the borrower has approve/eligible per the automated underwriting system or meets manual underwriting guidelines.

Per HUD agency mortgage guidelines, borrowers with under 580 FICO and down to 500 credit scores are a 10% versus a 3.5% down payment.

Comparison of Lenders For Bad Credit Homebuyers

Most New Jersey FHA lenders will not touch any applicants with an under 500 credit score as part of their lender overlays. Not many lenders will qualify and approve borrowers with credit scores down to a 500 FICO. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on FHA, VA, USDA, and conventional loans. We are licensed in New Jersey. Many of our borrowers are borrowers of FHA loans in New Jersey. Gustan Cho Associates has no lender overlays on FHA loans in New Jersey. We just go off the minimum HUD agency lending guidelines. As long as you get an approve/eligible per the automated underwriting system, Gustan Cho Associates will approve and close your FHA loan. Over 75% of our borrowers are folks who could not qualify for a mortgage at other lenders due to their lender overlays.

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

New Jersey Homebuyers Getting Denied on An FHA Loan

Mortgage companies who tell borrowers they do not qualify for an FHA loan often do not tell them it is because of lender overlays. Loan officers often just tell the applicant they do not qualify for an FHA loan.
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Mortgage loan applicants often do not question the denial and accept that they do not qualify for an FHA loan in New Jersey. Borrowers do not realize they may not qualify for an FHA loan with this particular lender but may meet all lending requirements of HUD and can qualify for an FHA loan with a lender with no lender overlays.

FHA Lenders With No Lender Overlays on Government And Conventional Loans

Gustan Cho Associates has no lender overlays on FHA loans in New Jersey. Over 75% of our borrowers are folks who could not qualify at other mortgage companies due to lender overlays or due to getting a last-minute mortgage loan denial. Gustan Cho Associates has a national reputation for being able to do loans other lenders cannot. Gustan Cho Associates are mortgage brokers licensed in 48 states with 190 wholesale mortgage lenders.

The team at Gustan Cho Associates also has alternative loan programs to FHA loans, such as non-QM mortgages one day out of bankruptcy, no-doc home loans, P and L stated income mortgages, 12-month bank statement mortgages for self-employed borrowers with no income tax returns required, non-QM jumbo mortgages with credit scores down to 500 FICO, and dozens of other non-QM and specialty mortgage loan programs.

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

New Jersey Loan Requirements 

As mentioned earlier, understanding the minimum agency mortgage guidelines on FHA loans is very important. If you get denied for an FHA loan in New Jersey and know that you meet the HUD agency guidelines, you will know that you got denied because of lender overlays and not HUD agency guidelines. If you meet the minimum agency mortgage agency guidelines on FHA loans, you will qualify for an FHA loan with a lender with no lender overlays in New Jersey.

HUD Agency Mortgage Guidelines For FHA Loans in New Jersey

In the following paragraphs, we will cover the minimum HUD agency mortgage guidelines for FHA loans in New Jersey. A 580 credit score is the minimum requirement to qualify for a 3.5% down payment home purchase FHA loan.

HUD requires a 10% down payment if the borrower has credit scores under 580 and down to a 500 FICO. Gift funds for the down payment and closing costs are allowed from family members. If the borrower is short with the seller’s concession, the lender can offer a lender credit in lieu of a higher mortgage rate to cover the down payment and closing costs.

HUD Guidelines on Non-Occupant Co-Borrowers

Non-occupant co-borrowers are allowed for borrowers who exceed the maximum debt-to-income ratio caps. The maximum debt-to-income ratio caps allowed to get an approve/eligible per automated underwriting system is 46.9% front-end and 56.9% back-end. The main borrower can have as many non-occupant co-borrowers on the FHA loan. To qualify for a 3.5% down payment home purchase FHA loan with non-occupant co-borrowers, the non-occupant co-borrowers need to be related to the main borrower by blood, law, or marriage. HUD allows non-family members to become non-occupant co-borrowers, but a 25% down payment versus a 3.5% down payment is required. Only one to four-unit owner-occupant homes are eligible for FHA loans. HUD does not allow second homes or investment properties to be eligible for FHA financing. Borrowers need to provide a two-year employment history.

HUD Guidelines on Gaps in Employments For FHA Loans in New Jersey

Recent graduates of high school, trade school, community college, college, or graduate schools do not need previous 2-year employment history. The years spent studying in schools can be used as work experience instead of actual work experience.

Gaps in employment in the past two years are allowed if the gap is not longer than six months. If you meet the above agency mortgage guidelines, you will get approved for an FHA loan in New Jersey.

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

Qualifying For An FHA Loan In New Jersey After Bankruptcy

Mortgage borrowers can become eligible for an FHA loan in New Jersey after bankruptcy. Homebuyers qualify for an FHA loan two years after the Chapter 7 Bankruptcy discharge date. You should have rebuilt and re-established credit after Chapter 13 Bankruptcy with no late payments after the discharge date.

HUD Chapter 13 Bankruptcy on FHA Loans While in Chapter 13 Bankruptcy

Homebuyers can qualify for an FHA loan in New Jersey while in an active Chapter 13 Bankruptcy repayment plan. You must have been on the repayment plan for at least 12 months. Chapter 13 Bankruptcy does not have to be discharged. You must be timely on all your payments during the Chapter 13 Bankruptcy repayment plan with no late payments inside or outside the Chapter 13 repayment plan. Trustee approval is required, and the file is manual underwriting.

FHA Loans After Chapter 13 Bankruptcy Guidelines

There is no waiting period after the Chapter 13 Bankruptcy discharge date. If the Chapter 13 Bankruptcy discharge is less than 24 months, the file needs to be manually underwritten. You should never have any late payments after bankruptcy. Lenders will classify borrowers with late payments after bankruptcy as second offenders.

Most lenders will not want to deal with borrowers with late payments after bankruptcy. Gustan Cho Associates can help borrowers with late payments after bankruptcy and foreclosure.

FHA Loan Requirements In New Jersey After Foreclosure Or Housing Event

There is a three-year waiting period after foreclosure, a deed in lieu of foreclosure, and a short sale to qualify for an FHA loan in New Jersey. If it is a timeshare foreclosure, it does not fall into the foreclosure category. Timeshare foreclosures are not foreclosures and are considered installment loans. Therefore, there is no waiting period after timeshare foreclosure. Rebuilt and re-established credit is required after a housing event and periods of bad credit. Gustan Cho Associates has helped countless borrowers qualify for an FHA loan in New Jersey after foreclosure, a deed in lieu of foreclosure, short sales, and periods of bad credit.

Buying A Fixer-Upper In New Jersey With An FHA 203k Renovation Loans With A Low Down Payment

FHA 203k Loans are acquisition and construction loans all in one closing. Homebuyers interested in buying a fixer-upper, foreclosures, or homes that do not meet construction guidelines for residential loans would need to go with an FHA 203k Loan. Lenders will not lend on homes that need repairs or are in poor condition, or are not habitable. FHA 203k loans allow homebuyers to purchase homes in need of either minor or major repairs and homes that are not habitable. Most lenders have tougher mortgage guidelines on 203k Rehab Mortgages than standard regular FHA Loans due to the added layer of risk. Lenders consider home buyers buying fixer-uppers as risky and may impose mortgage overlays.

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

FHA 203k Loan Requirements Versus Overlays From Mortgage Lenders

Lender overlays are additional guidelines in addition to the minimum FHA guidelines:

• Almost all lenders have mortgage lender overlays on FHA 203k Loans due to the risk factors
• Most lenders require a minimum credit score of 640
• Gustan Cho Associates Mortgage Group can help borrowers qualify for FHA 203k Loan With Low Credit Scores and Bad Credit

Depending on the loan amount, I have helped borrowers with as low as 580 credit scores qualify for FHA 203k Loans.

About FHA 203k Loans New Jersey

New Jersey is one of the hardest-hit states after the 2008 Real Estate Market Crash. The real estate market in New Jersey started recovering in early 2012. Home values throughout the state of New Jersey have started rising, and many areas of New Jersey have seen double-digit housing price increases

Due to this substantial housing value increase, both HUD and FHFA have increased FHA and Conforming Loan Limits for two years in a row. It is almost impossible to purchase a brand-new build home in New Jersey for a reasonable price. Fortunately, for homebuyers of fixer-uppers who are willing to put in the time and have the patience to rehab their home, they can take advantage of HUD’s 203k Renovation Loan.

FHA 203k Streamline Loan Requirements

There are two types of FHA 203k Loans. The first type of FHA 203k Loan is the FHA 203k Loan Streamline which limits the rehab loan amount to $35,000. Homeowners can do any type of remodeling to their home with an FHA 203k Loan Streamline, such as the following:

• kitchen remodeling
• bathroom remodeling
• attic remodeling
• windows
• roofing
• flooring
• electric
• plumbing
• HVAC
• appliances
• millwork
• siding
• gutters
• any type of home improvements except for structural improvements and room additions

Standard FHA 203k Loan Requirements In New Jersey

The second type of FHA 203k Loan is the full FHA 203k Loan. There is no maximum construction amount allowed. As long as the home will appraise out on an after-improved value and the FHA loan is within the maximum FHA loan limit after improvement. Homeowners can do all the types of repairs that can be done with a 203k Streamline PLUS structural improvements and room additions with a full 203k.

Down Payment Requirements on Buying A Home With An FHA 203k Loan

One of the greatest perks with FHA 203k Loans is that all you need is a 3.5% down payment on a home purchase of the after-improved value. For example, here is a case scenario. The buyer is purchasing a fixer-upper for $100,000. Need a construction loan for $100,000.. After the improved value of the property is $200,000.

We will need 3.5% of the $200,000 after improved value plus closing costs. Most homebuyers do not need to worry about closing costs because closing costs can be covered by seller concessions or lenders’ credit. Most FHA 203k borrowers just need to worry about the 3.5% down payment. The down payment on FHA loans can be 100% gifted by family members and relatives. This holds true as long as a gift letter is signed by the donor. It needs to state that the gift is only a gift, not a loan, and does not need to be paid back.

Contact Us If You Are Looking For New Jersey FHA Lenders With No Overlays

New Jersey home buyers of fixer-uppers, foreclosures, or homes that need major renovations and an FHA 203k loan, contact us at Gustan Cho Associates at 800-900-8569 or email us for a faster response. Text us for a faster response. Homebuyers can also email us at alex@gustancho.com.

The team at Gustan Cho Associates is available seven days a week, including holidays and weekends, to answer your questions. Or you may APPLY NOW online at www.gustancho.com and by clicking APPLY NOW on the top right of our website.

Starting The FHA Loan Process In New Jersey With A Lender With No Overlays On FHA Loans

If you have any questions about the content in this article or need to qualify for an FHA loan in New Jersey with a mortgage company with no lender overlays, please contact us at Gustan Cho Associates at 262-716-7151 or email us at gcho@gustancho.com. Text us for a faster response. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays. Gustan Cho Associates are mortgage brokers licensed in 48 states, including the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

Gustan Cho Associates is a mortgage broker licensed in 48 states with a national reputation for being able to do mortgage loans other lenders cannot do. Over 75% of our borrowers are folks who could not qualify at other lenders due to overlays, stress, last-minute loan denial, or not having the mortgage products. At Gustan Cho Associates, we only market mortgage loans that exist and are possible at competitive rates. Besides government and conventional loans with no lender overlays, we offer hundreds of non-prime mortgage programs, including non-QM and non-prime mortgages.

Gustan Cho Associates has a national reputation for being a one-stop mortgage shop. With a lending network of over 190 wholesale mortgage lending partners, we have thousands of conforming and non-prime mortgage loan programs.

Mortgage Lenders For Being Able To Approve Loans Other Lenders Cannot

Over 80% of our borrowers are folks who could not qualify at other lenders due to their lender overlays or due to getting denied for a mortgage loan at the last minute. Gustan Cho Associates can broker non-QM, specialty loan programs such as non-QM mortgages, no-doc loans, P and L stated income loan programs, asset-depletion loans, 12-month banks statement loan programs for self-employed borrowers with no income tax returns required, and dozens of other alternative mortgage loan programs.

This blog on New Jersey FHA lenders with no overlays on FHA loans was updated on November 27th, 2022.

Any Question About Qualifying For An FHA Loan In New Jersey? Contact us by clicking here!!!

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