FHA loans are an attractive option, especially for first-time homeowners because it is insured by the Federal Housing Administration (FHA). Primarily, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments. Typically the borrower can be approved with 3.5% down vs 20% that is required on other loan programs.
There are additional options with the FHA for downpayment Assistance through NJ Home Mortgage Finance Agency (NJHMFA). This program gives the qualified borrower $10,000 towards downpayment and closing cost that has 0% interest and does not need to be paid back as long as the owner remains in the home for 5 years. This option can help borrowers that need assistance in homeownership.