Buying a house in New Jersey

In this article we will explain in detail the process of buying a house in New Jersey and the steps that must be followed to purchase it. 

Buying a house in the US is a great achievement in life, but many do not know how to do it. Therefore, our experienced NJ real estate attorney at the Curbelo Law firm will be able to provide you with specialized legal advice in this area. From the offices located in Ridgewood, New Jersey, real estate experts can help you get your dream home in the Garden State.

Below is a step-by-step overview of how buying a home in New Jersey is done.

The Process Of buying a house In New Jersey In 2024

This process is similar to any other state. However, certain steps may have specific requirements for the state of New Jersey, so be sure to read carefully so you don’t miss any crucial details.

That being said, what do you need to buy a home in NJ? Let’s get started.

Step 1: Save For A Down Payment

The down payment represents the first fraction of the purchase price of a home and is usually paid at closing. Lenders in New Jersey often expect you to come up with 20% of the purchase price as a down payment. This means the following:

• If the cost of a property is $350,000, the down payment could be about $70,000. However, there are options to reduce this payment, such as government-backed loans (VA and FHA).
• Conventional loans allow for low down payments. However, these require private mortgage insurance (PMI) until the loan balance reaches 80% of the purchase price. On the other hand, FHA loans require the payment of a mortgage insurance premium (MIP) throughout the loan.
• For VA loans, no mortgage insurance payment is required. Instead, the buyer must pay a VA loan funding fee at closing. This ranges between 1.4% and 3.6% of the purchase price.

There are also other programs, such as:

• New Jersey Down Payment Assistance,
• US Department of Housing and Urban Development, and
• Down payment assistance from the New Jersey Housing and Mortgage Finance Agency (NJHMFA).

For more information, check our blog on the different types of mortgage loans in the US. 

Step 2: Assess Your Financial Situation

The second step for buying a house in New Jersey is determining the type of house you want to buy. Creating a budget is key when purchasing your own home.

Homeowners should be able to cover any sudden expenses that arise in the home, including regular monthly expenses. Evaluating the financial situation before a purchase will allow you to know the financial limits. Some of these expenses are:

• Property maintenance.
• Property taxes.
• Association or membership fees (in the case of condominiums or other residential constructions).
• Home and risk insurance.

Although several expenses are included as part of the monthly mortgage payment, it is important to know:

• Credit score,
• Initial payments,
• Annual maintenance costs,
• Home Closing Costs in New Jersey. These costs include:
  • Homeowners insurance.
  • Property taxes.
  • Loan application fees.
  • Title insurance policies and rates.

Step 3: Get Pre-Approved For A Home Loan

Usually in New Jersey, most sellers will require a mortgage pre-approval before showing buyers their property.

It is not necessary to choose a lender at this time. In fact, it is recommended to compare:

• Interest rates, and 
• Pre-approval amounts from multiple lenders to ensure you get the most favorable terms when buying a house in New Jersey.

Once pre-approved, it is key that the buyer’s financial situation does not change. For example, if it gets worst, it can derail the process and prevent you from closing on your home.

Some tips so that the credit does not change after receiving a pre-approval letter are:

• Avoid opening new credit accounts,
• Do not close accounts that have been open for a long time,
• Make all credit card payments on time.

Step 4: Start Your Home Search

Typically, no property meets all of the desired characteristics. However, the home purchased should meet most of the family’s needs and wishes.

It is recommended to make a “wish list” that includes all the priority features and those you want to find. Some elements to consider are:

• Location.
• Distance from home to work.
• Distance to shopping centers, childcare centers or recreational areas, among others. 
• Access to roads or public transportation.
• Reputation of nearby public schools. 
• Quality of the neighborhood.
• Interior design of the house.
• Number of bedrooms and/or bathrooms.
• The overall community.

We highlight the importance of location, since transportation costs can seriously affect the budget. Other aspects to consider are:

Check Current Housing Inventory

The search for a home can significantly influence purchasing choices. For example, May typically has the largest number of homes for sale in New Jersey. Therefore, searching during this season could offer more options and a greater probability of finding your dream home.

On the other hand, December provides more limited options in New Jersey. This is because it usually has almost 50% fewer homes for sale compared to May.

Choosing A Single-Family Or Multi-Family Home

Single-family homes come in two types: 

1. The modern ones, and 
2. The old ones but located in established neighborhoods.

Depending on which one is chosen, the price and maintenance will vary. In addition, there are also multi-family homes with the goal that several families inhabit the property. 

Consider Communities Managed By Home Owners Associations (HOAs)

Homeowners Associations (HOAs) are organizations that set standards for properties and residents. These communities encompass condominiums and single-family homes, so they tend to attract those who prefer to avoid constant maintenance. 

We also have properties to remodel, which are older homes that need repairs and are located in abandoned areas. Therefore, before consideringb buying house in New Jersey, we recommend consulting with an inspector to estimate costs and work.

Step 5: Attorney Review Period During The Property Purchase Process

In New Jersey, pre-printed contracts include an attorney review clause. This clause gives buyers and sellers 3 days to consult a real estate attorney. 

During this period, the buyer may disapprove of the terms or both parties may void the contract. If it is not rejected within this period, the buyer is bound by the terms of the contract.

Step 6: Make An Offer

Now that you know the initial steps of buying a house in New Jersey, you should consider making an offer. Typically, the attorney or real estate agent helps write a persuasive offer. 

Also, it should be noted that homes in NJ sell faster in June and slower in December. Therefore, buyers should prepare to act quickly in active months. Other aspects to consider are the following:

• Is it necessary to make repairs to the house?
• How old is the house and what condition is it in?
• Are sellers willing to share expenses?
• Is the property in a good location?
• Does it have the characteristics that you and/or your family are looking for?

Close attention should be paid to the terms and conditions of the sale of the house. In addition to showing the following:

• Name of the buyer and seller.
• Property address.
• Purchase price offered. 
• Any clause in relation to installations, appliances and so on.
• Any other additional clause.
• Any contingency to which the offer is subject. For example, financing guarantee, pest inspection, etc.

Understanding Clauses And Contingencies

The inclusion of clauses and contingencies in the offer protects the buyer in case of a loan not being approved or other problems. Therefore, a mortgage contingency clause and others are recommended based on:

• State of the house,
• pest inspection, 
• Lead-based paint and
• Radon gas. 

After the offer, the seller can accept, reject or submit a counteroffer. During the negotiation, the house remains on the market. Therefore, knowing the deadlines is crucial, and legal assistance is recommended for:

• Negotiation, 
• Prepare the offer, and 
• Protect the interests of the buyer. 

After acceptance of the offer, the real estate agent presents a sales contract for legal review before signing. Additionally, the closing and occupancy date must be reflected in the contract.

Step 7: Get A Mortgage

After accepting and signing the purchase and sale agreement, the mortgage application begins. Therefore, the choice of lender is crucial, considering options such as:

• Mortgage companies, 
• Loan and/or savings institutions,
• Federal credit unions, and 
• Other financial institutions. 

Additionally, key terms such as the interest rate, closing costs and other charges should be compared. All this is essential, since each lender has different conditions. Additionally, the following should be considered:

Additional Charges

Generally, when applying for a mortgage, you incur a non-refundable fee that includes:

• Appraisal costs, 
• Credit report, and
• Lender risk assessment. 

The law states that the lender must provide a “good faith” estimate of closing costs within the first 3 days of the loan application. Once the loan commitment is issued, the closing date is set.

Documents To Submit During The Application

It is possible to speed up the mortgage application process. To do this, the following information must be submitted:

• Accepted purchase offer and the purchase and sale agreement. It is important that both are signed.
• Name and address of all employers. It must be within the last 2 years.
• Last two federal tax returns. Must be filed on paper. Additionally, for self-employed mortgage loans, they must have an annex of income for the last 2 years. Likewise, employees of their own company must also file a statement of their profits and losses.
• Annual gross salary. It must reflect overtime and bonuses separately. In addition to submitting copies of W-2 forms from the last 2 years and your most recent pay stubs.
• For social security dependents. A copy of the 3 most recent payment stubs or 3 bank statements. 
• Copy of alien resident registration card (if applicable). A copy of the front and back must be submitted.
• Name and address of your banks. Also from credit cooperatives and depositories where deposit accounts are held. 
• List of your financial stocks. Bonds, certificates of deposits or others may be included. Likewise, copies of the last 3 monthly or quarterly statements, account numbers and others must also be included.
• Complete list of debts. It can include credit card payments, student loans, cars and others.
• Verification of monthly lease payments. Copies of canceled checks (back and front) from the last 12 months must be included.
• Copy of divorce decree or court order (if applicable). This is in case of paying alimony.

Step 8: Inspection And Appraisal

When it comes to home inspection in New Jersey, typically, the buyer is responsible for finding and paying for a licensed inspector. The latter will determine the conditions of each aspect of the house. Additionally, the cost will depend on the location and size of the home. Having said this, the inspector will: 

• Examine the structure and all its systems, 
• Identify if there is any current or future problem, and 
• Be able to recommend ways to fix it. 

In some cases, structural defects could be used to the buyer’s advantage during the negotiation process to reduce the price. 

In New Jersey, disclosure laws require sellers to disclose known problems, but buyers should take precautions. In addition to the general inspection, it is suggested to perform specialized tests, such as:

1. Radon testing to prevent lung cancer, and 
2. A pest inspection to detect structural problems.

Through the New Jersey Department of Environmental Protection website, individuals can request a radon test kit. 

On the other hand, appraisals determine the value of the property. Therefore, if you use a mortgage to purchase a new home, the lender will request a home appraisal in New Jersey to make sure the home is worth the amount borrowed.

Step 9: Prepare For Closing

It is important to check the entire home within 24 hours before closing, in order to ensure that it is as expected. Additionally, you must ensure that all appliances and systems are working properly. If anything is discovered after the closure, there will be no turning back.

What Happens During A Closing?

During this process, there will be many documents to review and subsequently sign. The lender or designated individual will:

• Supervise both the signatures and the registration of documents, 
• Raise the funds, and 
• Ensure that expenses are disbursed appropriately. 

At closing, you should expect to receive one or both of the following documents:

1. Mortgage payment. It is legal evidence of the mortgage and includes a formal promise that the debt will be paid. You can also detail the terms of the loan and the penalties imposed by the lender if you do not pay on time.
2. Deed of Trust. It is a document that provides the lender with a claim against the home in the event that the buyer does not comply with the terms of the mortgage. Additionally, it outlines the lender’s legal rights, obligations, and right to foreclose if the loan is defaulted.

If you are in a foreclosure scenario, at Curbelo Law we are also expert NJ foreclosure lawyers.

Additionally, the following should be considered before receiving the keys to your new home:

• Your loan will become effective and you will receive the mortgage.
• The terms of the agreement between you and your lender will be confirmed.
• The terms that both the seller and you agreed for the sale will be signed.
• Legal real estate title to the property will be transferred . 

It is important to clarify when the first mortgage payment is due and where it should be sent.

What Happens After Closing?

Weeks after closing you will receive a statement in the mail indicating the due dates and the mailing address where you will send your payments. 

At some point after closing, the buyer may be notified that their loan is being transferred to another lender for “administrative reasons.” This means that the entity will be the agent in charge of collecting the mortgage payment. 

However, you should inform yourself if at the time of applying for the loan, the lender intends to administer or transfer the administration of the loan.

Do I Have To Be An American Citizen To Apply For A Home Loan?

It is not necessary to be an American citizenship to apply for a mortgage loan. However, you must be a lawful permanent resident and have a social security number.

For more information, check our blog “Can an illegal immigrant buy a house?”

What If I Have No Credit?

Homeowners’ credit history is considered on an individual basis, so it is not advisable to make assumptions regarding whether the credit is positive or negative. In these cases, the buyer can ask a lender to evaluate their credit history and pre-qualify them before applying for a loan.

How Much Money Do You Need To Earn for buying a house Like The One You’re Looking For In New Jersey?

The amount of money earned per month is not very relevant to obtaining a mortgage loan. This is because the lender usually gives more weight to a good credit score than to the source of income.

Additionally, to pay for a house you will need to have money for the down payment, as well as money for monthly payments. This is reflected as follows:

• Initial payment. It ranges between 3% and 20% of the purchase price. 
• Closing costs. They range between 2% to 5% of the purchase price.
• Unexpected expenses. It usually ranges between $250 to $800. It includes bank charges, the house inspection, appraisal and others.

Taking this into account, let’s take for example that a house in New Jersey costs $300,000, then it will be reflected as follows:

• Initial payment. Between $9,000 and $60,000.
• Closing costs. From $6,000 to $15,000.
• Miscellaneous expense. From $250 to $800.
• Total. Between $15,250 and $75,800.

What Is The Minimum Down Payment For A House In NJ?

Most mortgage lenders require a down payment of at least 3%. The minimum down payment depends on your credit score. If you have a score of 720 or higher, the minimum down payment will be 10%. 

Loans for buying a house in New Jersey with a credit score above 580 require a 3.5% mortgage down payment.

How Much Money Can I Borrow For A Mortgage?

The amount varies depending on the interest rate, length of the mortgage, condo expenses, tax costs, insurance, among other factors. For these types of situations, it is advisable to obtain an estimated amount through a mortgage calculator.

Currently, property buyers in the Garden State face a huge challenge, the ever-increasing mortgage rates. In fact, in New Jersey, the average 30-year fixed mortgage rate is around 6.95%. As a result, this raises the average monthly mortgage payment.

Do you know what a 40-year mortgage is? We discuss the topic in detail in our blog.

How Long Will It Take After I Have Submitted An Application?

The process can take from one to several weeks, it all depends on several factors. Additionally, within 3 days of applying, the lender will provide you with an estimate of the closing cost.

Likewise, the buyer will receive a statement of the estimated monthly payments, financing costs and other information about the mortgage loan.

What Qualifies As A First Time Home Buyer In NJ?

First-time homebuyers may qualify for various loan programs and/or mortgage lenders. These programs only apply to those buyers who use the property in the Garden State as their primary residence and have not owned a home in the last 3 years.

If you would like more information on how to buy a house in NJ as your first-time buyer, check out our blog: “ NJ first-time homebuyer program” for further information on the subject. 

Find A Profitable Real Estate Investment In New Jersey With Curbelo Law

At Curbelo Law, our experts will be able to guide you when buying a house in New Jersey. In this blog we were able to explain the process in general terms, but as you can see, it can become complex.

Buying a home is a large investment and you should consult our experienced real estate attorney to protect your rights. The expense of a lawyer is minimal compared to the purchase of your home, bank charges, moving costs and other expenses. 

Therefore, it is important to have specialized advice. Whether you are buying or selling a house in New Jersey, Curbelo Law helps all types of clients interested in real estate matters. Don’t hesitate to contact us today.