About two years ago, I was involved in a couple of sales with first time home buyers in which they choose to use the state first time home buyer lending program with a smart start grant. This program was a very useful and appropriate program for many first time buyers, with the rates around 6 1/8, nearly a full percent lower than conventional rates at that time, plus they could obtain up to a 4% grant from the state towards closing costs, that would be completely forgiven if they stayed in the home for 7 or more years. However since then, rates have dropped down into the 5% range, but the first time home buyer program rates are still up around 6%. However, if you choose to not take the smart start assistance money, you can obtain a rate of 5.5%, but what is the point with normal rates at 5%. If the buyer decided to take advantage of the full 4% smart start assistance, they would obtain a rate of 6.25%. My opinion, this program used to be fantastic considering the rates were low compared to normal rates back then, plus 4% of the purchase price in a grant from the state in smart start assistance.
Now however, it seems like going with the pre-fund program through the tax credit makes more sense.
I am sure all of us are familiar with the $8,000.00 tax credit that will be available for first time buyers purchasing a home PRIOR to December 1st, 2009. Now New Jersey, only 1 of 3 states to offer the program, is introducing the "Pre-Fund" program. This program allows the home buyer to be able to receive up to $5000 of the tax credit PRIOR to purchasing their home that can be used toward down payment and/or closing costs. The qualifications for this program are similar to the qualifications for the tax credit. In order to qualify you must meet both sets of requirements and reasonably expect to receive the tax credit. This is a loan which must be repaid upon receiving the tax credit from the government. This can be used with either conventional or FHA financing and is offered at a competitive interest rate. There is also grant money (the program talked about above) that may be available in addition to the "Pre-Fund" Program that can also be applied to the down payment and/or closing costs. These programs can provide the opportunity to take advantage of the current real estate market, as home prices have decreased and interest rates are low.
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