May 24, 2023
Lender Bulletin 2023-13:
Acceptable Uses of Down Payment Assistance (DPA) Funds
Effected Programs: Smart Start Down Payment Assistance
Effective Date: Immediately
NJHMFA encourages all of our business partners and constituents to submit any and all documentation in an electronic format whenever possible as staff will continue to check email and review information submitted electronically.  

Attention Lenders:
Acceptable Uses of Down Payment Assistance (DPA) Funds
This bulletin is to inform lenders that NJHMFA’s Down Payment Assistance Program (DPA), the Smart Start DPA, is permitted to be used only to cover the buyer’s down payment and/or closing costs, escrows, and prepaid items typically covered by the buyer for real estate transactions in New Jersey. If there are remaining funds, the borrower can make a larger down payment or a principal reduction may be applied at closing. Limited cash back funds may be provided to borrowers at closing, strictly to reimburse the borrower for eligible closing costs or Earnest Money Deposit (EMD) paid by the borrower prior to closing. See Chapter 9 of the Guide for more detail regarding cash back at closing.
Ineligible DPA uses:
  • DPA funds may not be used to cover closing costs customarily paid by the property seller, including, but not limited to, the realtor commission or the Realty Transfer fee, commonly known as transfer taxes.
  • DPA funds may not be used to cover an appraisal shortfall, where the appraised property value is less than the purchase price of the home. 

In both of these cases, NJHMFA will require that there are enough eligible funds from other sources to cover these ineligible items.
  • If an appraisal comes in $5,000 below the purchase price, and the price is not renegotiated, the borrower must have at least $5,000 of their own funds or eligible gift funds into the transaction.
  • If the buyer is paying the property transfer tax for the seller, there must be enough of a seller or lender credit, or enough borrower funds or eligible gift funds into the transaction to cover the full amount of property transfer tax paid by the borrower.
  • If the borrower is paying any portion of the real estate commission, the borrower must have at least enough of their own funds or eligible gift funds into the transaction to cover the amount of commission paid by the borrower. Lender or seller credits are not permitted source of funds to cover real estate commissions.
Lenders are reminded that the DPA should be used only for down payment and for normal and customary closing costs paid by the borrower.
Questions? Need Help? 

If you have questions about one of our loan products or need help with a loan in the ILRS system, please e-mail your requests to

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New Jersey Housing and Mortgage Finance Agency | 609-278-7400 |