A guide to first-time home buying in Middlesex County:

by Payel Kundu

Nov 15, 2023 8:00AM EST

Buying your first home is a huge milestone. While it can be complicated, following a simple checklist can help you manage what you need to do when financing the purchase of your new property. The following steps are to prepare you for a successful home buying journey.

  • Know your finances well: In order to know exactly what your lenders will be looking at during the application process, you should be aware of your own credit history. There are some time requirements, however, but most people can buy before they think they can. It really pays to check with a lender on time constraints, foreclosure and bankruptcy timelines, and what you can do today is to prepare yourself for your next home loan. But until you know your credit score, there’s no need to panic. Every lender requires different documents.
  • Prepare yourself: Establish a realistic budget as per your comfort for each month, don’t forget that you will also need to pay for real estate taxes and insurance on the property.
    • Talk with a lender to determine whether you’re ready to buy a home, and get pre-qualified for a mortgage if needed. Getting pre-qualified gives you a general idea of the lending amount that you’ll likely qualify for, based on the information that was provided to the lender by you. Home loan specialists can assist you with this, or if you’re not quite ready to take the next step on your home buying journey, they’ll guide you on how to best prepare.  
    • Figure out your priorities and goals before ‘house shopping’ e.g. the style of the house, size, location, neighborhood, number of bedrooms, bathrooms, etc.
  • The ‘American dream programme’: The Middlesex County Department of Housing, Community Development & Social Services administers its American Dream Down payment Program (ADDP) in accordance with the following procedures and guidelines.
  • The County will enter into Agreements each year with one or more HUD-certified housing counseling agencies to help administer the program. The agencies will be responsible for certifying applicants meet all program requirements (including their status as first time homebuyers) and also providing homebuyer training.
  • The County will use the HOME income limits for the American Dream Downpayment Program, which are released by HUD on an annual basis.
  • The applicant(s) will have to purchase the housing unit within the HOME Consortium jurisdiction, which includes all of Middlesex County except New Brunswick and Perth Amboy.
  • All adult household members must be first time homebuyers under HUD guidelines. This means they could not have owned a residence for the past three years. For this programme, Middlesex County will consider any residential property owned within the United States or in a different country. Certain exceptions to first time status exist for single parents and displaced homemakers.
  • At least one of the adult applicants must currently reside in Middlesex County and have maintained residency for at least one year at the time of application.
  • At least one of the adult applicants must complete an in-person homebuyer education class offered by a HUD approved housing counseling agency.
  • The applicant(s) must be purchasing a single-family housing unit. This includes detached single-family homes, condominiums, townhouses, co-ops, and duplexes (where only half is purchased). The purchase of a multi-family home is not eligible.
  • The housing agencies will use the Part 5 (Section 8) Income Definition to determine income eligibility. The agencies will be required to document compliance through the use of the HUD Online Income Calculator and must submit the supporting source documentation. The income of all adults (18 and older) who will be residing in the purchased housing unit will be counted regardless of whether or not they are on the mortgage loan or deed. The only exception is for full-time college students who are not an applicant or co-applicant.
  • The contracted purchase price can not exceed four times the certified household income level as determined by the Part 5 Income Definition. (In cases of 203K loans the loan amount will be used instead of purchase price.) This amount also can’t exceed 95% of the area median purchase price. Currently, this figure is $304,000. The County will use the lower amount in setting an applicant’s maximum allowable purchase level.
  • The applicant(s) must showcase that they are putting at least 1% of the contract of sale purchase price towards downpayment and/or closing costs.
  • Mortgage co-signers who will not be occupying the property are not permitted.
  • All mortgages must be ‘fixed rate’ mortgages.
  • Applicants that can close a loan at or below 90% of Loan to Value (LTV) are ineligible. LTV will be based on the sales prices. The County will take into account the applicant’s liquid assets, seller’s concession amount, other downpayment assistance program, and any amount “gifted” toward the purchase. Repair credits provided by the seller to the buyer are not considered a seller’s concession for closing costs.
  • The amount of ADDP assistance for each eligible application will be $5,000.
  • To avoid over-enrichment, a liquid assets test will be applied. Applicants may not have more than $10,000 in liquid assets after closing the American Dream Downpayment Program loan. IRAs, 401(k)s and other tax-sheltered retirement accounts will not be considered in calculating liquid assets. Also, the homebuyer cannot receive back any funds at closing, which would be documented on the HUD-1 form.
  • All ADDP homebuyers will have a five-year term of affordability placed on their property, during which they must remain as owner-occupiers of the property. If the property is sold or doesn’t maintain compliance within the five year term, the full amount of ADDP assistance will have to be paid back, plus 4% simple interest. After five years, the loan is completely forgiven and the mortgage discharged.
  • Each applicant must provide documentation that the dwelling was built after 1978 or else document a visual inspection was completed that indicates no lead based paint hazards. The County will not pay for the cost of any needed lead based paint inspection. This inspection must be provided at the time of application.
  • Each property purchased must meet housing quality standards. The applicant must provide a copy of the home inspection at the time of application.
  • The County’s ADDP program will only provide downpayment and closing cost assistance, not rehabilitation costs. Any rehabilitation costs needed to bring the property up to housing quality standards are to be paid for by the buyer if the seller is unwilling to cover the costs.
  • The agencies will be reimbursed their contracted per unit fee for each applicant they provide homebuyer training for, that is approved by the County for ADDP funds and closes on a property. Reimbursement will only be provided after the agency documents:
    • Course certificate indicating applicant completed homebuyer education course
    • Agency provided the applicant required one-on-one homebuyer counseling
    • Agency processed ADDP application, including determining if potential homebuyer meets all HUD and County program requirements. This includes, but is not limited to, calculating income using HUD income calculator, collecting necessary source documentation, and supplying all necessary documents to the County for its approval.
  • An applicant can only submit the application once he/she can provide a fully executed contract that is out of attorney review. The agency must submit the application to the County approximately seven to eight weeks prior to the closing date to allow time for the County to review the application and for approval and authorization of the issuance of a check at a Board of County Commissioners meeting.
  • The check made payable to the buyer’s attorney’s trust account (or title company if so requested) will be provided on or before the closing date. Before the check is issued all of the supporting documentation must be provided to the County. It will be the responsibility of the County to verify the closing takes place and the mortgage documents are recorded. The County will maintain the original mortgage, note, and agreement in our files.
  • Once the closing has taken place and the documents are recorded, the agency may submit for reimbursement for its services in accordance with its contracted amount with the County.
  • During the term of affordability, the homeowner may request a subordination of the County’s mortgage for purposes of refinancing under the following conditions:
    • New mortgage rate and term will allow homeowner great housing affordability
    • A “work-out” plan is being implemented to reduce the risk of foreclosure
    • Cash outs, although discouraged, will be permitted if the homeowner provides documentation that the combined loan-to-value ratio is no greater than 80% of the appraised value of the house.
  • Documentation for all refinance requests should include:
  • 1003 Loan Application
  • New lender’s name and address
  • Amount of the new mortgage, mortgage term, and mortgage rate
  • Copy of the appraisal (unless not required for streamlined refinance with no cash out)
  • Schedule A & B form the Title Search
  • The County may request additional information before granting the request. The County is not obligated to grant a subordination request. Subordination requests should be submitted at least six to eight weeks in advance of scheduled refinance closing.

So why delay the American dream? If you’re planning on staying in a home for at least five years, you owe it to yourself to find out exactly what you need to look after and look for while considering buying a house in Middlesex County for the first time. The above mentioned points and respective details are going to be a perfect guide for a starter on your home-buying quest. 

Disclaimer: This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Please do your own due diligence.

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