What I need to buy a house in NJ

So, what do I really need to buy a house in NJ? This is a frequently asked question that we get a lot in the office. In this article we will explain in detail how to buy a house in New Jersey and the steps of the process that you must follow to acquire 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 and Newark, New Jersey, real estate experts can help you get your dream home in Garden State.

The Process To Follow To Buy A House In NJ In 2023

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.

With that said, what do I really need to buy a house in NJ? Let’s start.

Step 1: Assess Your Financial Situation

The first step in knowing how to buy a house in NJ is to determine the type of house you want to buy, where and how much you can afford. The preparation of a budget is essential when purchasing your own home.

Owners must be able to cover any sudden expenses that arise in the house, including the usual monthly expenses. Evaluating your financial situation before a purchase process will allow you to know your financial limits. Some of the expenses that you will have to pay are:

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

Although many of these expenses are included as part of your monthly mortgage payment, it is very important that you know the following:

• Your credit score: This will affect your chances of getting a home mortgage. Lenders need to know what previous loans you took out and how you repaid them. Generally, a credit score of at least 620 is needed for most conventional loans. 
• Down payments: To get a conventional loan, you will need to make a down payment. If you can’t afford this, the lender may require private mortgage insurance (PMI) that you’ll have to pay until you reach the down payment on the property you want to buy. This mortgage insurance only protects the lender. 
• Annual maintenance costs: In New Jersey, homeowners typically spend several thousand dollars a year on maintenance for their homes, but this varies widely depending on your home. As a general rule, it is advised that you save at least 1% of the value of your home each year to cover possible repairs.  
• Closing costs: Home buyers typically have to pay closing costs in New Jersey, which are between 2% and 5% of the property price. The seller is responsible for some closing costs, but sometimes you as the buyer will be the one to pay them. These costs include:
  • Real estate appraisal rates. 
  • Home inspection.
  • Insurance for homeowners.
  • Property taxes.
  • Loan application fees.
  • Title insurance policies and rates.

Step 2: Get Pre-Approved For A Home Loan

It’s key to know how much you can really afford before you consider buying and begin your search for your New Jersey dream home. The best way will be having a prior mortgage approval. This pre-approval does not obligate you to obtain a loan from that lender.

Step 3: Start Your Home Search

In general, no property meets all the characteristics you want, but the house you buy in NJ should be able to meet your needs and the wishes of your family as much as possible.

We recommend that you make a “wish list” that includes all the features that you consider a priority in your daily life and want to find in the house you are looking for. 

Items to consider:

• The ubication.
• The distance between home and your work.
• Distance to shopping centers, child care centers or recreational areas, among others. 
• If you have good access to roads or public transport.
• The reputation of nearby public schools. 
• Quality of the neighborhood.
• The interior design of the house.
• Number of bedrooms and/or bathrooms.
• The overall community.

We emphasize again in the importance of the location of your new home as transportation costs can seriously affect your budget. 

Another aspect to consider is whether the property is:

Single Family Home

These are usually the most common properties that homeowners are looking for. There are two relevant options: 

• Modern single-family homes: Possibly with a more efficient heating system, better insulation, and lower maintenance costs. On the other hand, the purchase price is usually higher.
• Older single-family homes in a well-established neighborhood: Usually these have more space, are less expensive, and centrally located. On the other hand, they require more remodeling and maintenance.

Multifamily Homes

The purpose of these properties of 2 to 4 units is that several families inhabit the property. 

Communities Managed By Home Owners Associations (HOA)

Home Owners Associations (HOAs) are organizations that enforce standards for properties and their residents. Most people who don’t want to deal with front-end maintenance or upkeep are drawn to HOA-managed communities.

HOA may include:

• Condominium communities.
• Single family homes.
• Serial houses.

Residents of a community managed by HOA, pay a monthly, quarterly or annual fee for the services offered, as long as the rules and regulations that seek to preserve the community are followed to guarantee an acceptable quality of life for all residents.

Property To Remodel

The properties to be remodeled are usually houses with a considerable age and require repairs or modernizations. These are often found in old neighborhoods or sites showing signs of abandonment.

If you consider this option, take into account the costs involved. Before making the purchase it is crucial to find a home inspector or contractor who will provide you with an estimate of costs and work required. 

Step 4: Attorney Review Period During The Property Purchase Process

In New Jersey, there is an attorney review clause in pre-printed form contracts. The clause states that the buyer and seller have 3 days from the date of delivery of executed contracts to consult a real estate attorney. 

During the attorney review period:

• The buyer can have an attorney review the contract and disapprove of the terms of the contract;
• Both the buyer and the seller can disapprove of the contract and void it. 
• If the contract is not rejected within the attorney review period, the buyer will be bound by the contract as written.

Step 5: Make An Offer

Now that you know the initial steps of how to buy a house in NJ, you should think about making an offer. To do this, think about the following:

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

You need to pay close attention to the details of the property and make sure the offer clearly outlines the terms and conditions of the home sale, as well as showing:

• Your name and the seller’s name.
• The address of the property.
• The purchase price offered. 
• Any clause in relation to facilities, appliances and others.
• Any other additional clause.
• Any contingency to which the offer is subject. For example, financing guarantee, pest inspection and others.

The Clauses And Contingencies

Including the clauses and contingencies in your offer is a guarantee to protect you and your money in case a loan is not approved and the agreement is canceled.

Experts recommend that a mortgage contingency clause is included in the purchase agreement. This clause allows you to keep your deposit in case the mortgage is not approved. Other contingency clauses should be based on:

• State of the house.
• Pest inspection.
• Lead-based paint.
• Radon gas.

Offer Negotiation

After the offer the seller can accept, reject or submit a counter offer with a different price. In the event of a counter offer, you have the same options.

Keep in mind that as long as there is an offer negotiation, the house will remain on the real estate market. 

The Dates And Deadlines

It is important to know the time it will take to negotiate the offer with the seller, conduct an inspection or get the mortgage approved. All of these deadlines must be met before the closing date. 

Legal Assistance 

It is always important to contact real estate legal experts to help protect your interests during the property purchase process. They may provide assistance in:

• The negotiation.
• The preparation of the offer.
• Preparing a preliminary design of the purchase agreement.
• Protecting your interests and money.
• The mortgage application process.
• Being present at the closing time.
• Giving you the right of 3 days for a review of the purchase agreement.

After finalizing the negotiations and if the offer is accepted, the real estate agent presents a purchase agreement, which is a document detailing the contract. The attorney must review the sales contract before you sign it, and the closing date and date of occupancy are reflected in the contract.

Step 6: Get A Mortgage

After accepting the offer and signing the purchase agreement, you must apply for the mortgage. There are many ways to obtain financing, so it is important to determine where to apply. 

You need to choose a lender you trust, plus the loan stays within your budget for several years. You can explore the following options to receive a loan:

• Mortgage companies.
• Loan and/or savings institutions.
• Federal Credit Unions.
• Other types of financial institutions.

Since each lender will have different terms for the mortgage, you should compare the following key points to know which would be the best option:

• The interest rate.
• Whether the rate is fixed or variable.
• If the rate can be frozen at the time of applying for the mortgage.
• Closing costs.
• If there are other fees charged by the lender.

Additional Charges

Generally, when applying for a mortgage there will be an additional non-refundable fee. This fee covers the cost of property appraisal, lender’s underwriting and credit report. 

The law requires that within 3 business days of submitting your loan application, the lender must provide you with a “good faith” estimate of the closing costs you must pay. After the lender issues a loan commitment, the closing date is set.

Documents To Submit During The Application

It is possible to expedite the mortgage application process by submitting:

1. The accepted purchase offer for the property and the purchase agreement: It is important that both are signed.
2. Name and address of all employers: Must be within the last 2 years.
3. Last two federal tax returns: Must be filed on paper.
4. Annual gross salary: You must reflect the overtime and bonuses separately, in addition to submitting copies of the W-2 forms of the last 2 years and your most recent pay stubs.
5. For mortgages for self-employed workers: Submit copies of the federal income tax return with all the annexes for the last 2 years. If you are an employee of your own partnership or company, you will need to submit a copy of your income for the last 2 years and a statement of your profit and loss.
6. For dependents of social security: Submit a copy of the 3 most recent payment receipts or bank statements. 
7. Copy of your alien resident registration card (if applicable): You will need to submit the copy of the front and back.
8. Name and address of your banks: Also from credit unions and depositories in which you have deposit accounts. 
9. List of your financial actions: It can include the bonds, certificates of deposits or others. Include copies of the last 3 monthly or quarterly statements, your account numbers and others.
10. Complete list of your debts: It can include credit card payments, student loans, cars and others.
11. Verification of monthly lease payments: Include copies of canceled checks (back and front) from the last 12 months.
12. If you pay alimony: Provide a copy of the divorce decree or court order.

Step 7: Home Inspection

Typically, you will be responsible for finding and paying for a licensed inspector to determine the condition of every aspect of your home. The cost ranges from $300 to $500, but it all depends on the location and size of your home.

The inspector will examine the structure and all of its systems, identify if there are any current or future problems, and be able to recommend ways to fix them. In some cases, flaws in the structure could be used to your advantage during the negotiation process to bring down the price.

For more information on the subject, check out our home inspection in New Jersey blog.

Step 8: Prepare For the Closing

It is important to review the entire house within 24 hours before the closing, in order to make sure that it is as you expected it to be. You must ensure that all appliances and systems are working properly. If you discover anything post-closing, there will be no going back.

What Happens During A House Closing?

Generally, the closing of a property usually takes place in the office of the legal adviser or in the office of the mortgage lender. During this process, a closing agent and an escrow agent will be present.

During this process, there will be many documents to review and then sign. Here again it is key to have our attorney by your side.

The lender or designee will oversee all signing and recording of documents, collect the funds, and ensure expenses are properly disbursed. 

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

• Mortgage Note: This is legal evidence of your mortgage and includes your formal promise to pay the debt. You can also detail the terms of the loan and the penalties imposed by the lender in case of non-payment on time.
• Deed of Trust: This is a document that gives your lender a claim against the property in the event that you default on the terms of the mortgage. It outlines your legal rights and obligations, as well as the lender’s right to foreclose if you default on your loan.

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

Consider that before you receive 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 title to the property will be transferred . 

It is important to be very clear about when the first mortgage payment is due and where you should send it.

What Happens After The Closing?

Weeks after the 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 the closing, you may be notified that your loan is being transferred to another lender for “administrative reasons.” This means that the entity will now be the agent in charge of the collection of the mortgage payment. 

However, you must be informed if at the time of requesting the loan, the lender intends to administer or transfer the administration of the loan.

Do I Have To Be A US Citizen To Apply For A Mortgage Loan?

You do not need to have US citizen to apply for a mortgage loan. However, you do need to be a lawful permanent resident (Green Card holder) and have a social security number.

What If I Have No Credit?

Homeowners’ credit history is considered on an individual basis, so it’s not a good idea to make assumptions about whether your credit is good or bad. You can ask a lender to review your credit history and pre-qualify you before applying for a loan.

Remember that credit counseling agencies are one of the best resources to be able to correct your credit.

How Much Money Do You Need To Earn To Buy A House Like The One You’re Looking For In NJ?

The amount of money you earn per month is of little relevance to obtaining a mortgage loan. This is because the lender will generally give more importance to a good credit score than to the source of income.

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

• The initial payment: It ranges between 3% and 20% of the purchase price. 
• Closing costs: They range from 2% to 5% of the purchase price.
• Unexpected expenses: It is usually around $250 to $800. Bank charges, home inspection, appraisal and others are included.

Taking this into account, let’s take for example that a house in New Jersey costs $300,000, then the:

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

What Is The Minimum Down Payment For A House In New Jersey?

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 to buy a house in NJ with a credit score above 580 require a 3.5% down payment.

How Much Money Can I Ask For As A Mortgage?

The amount varies depending on the interest rate, the length of the mortgage, condominium expenses, tax costs, insurance, among other factors. For this type of situation, it is advisable to obtain an estimated amount through a mortgage calculator.

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. Also, within 3 days of applying, the lender will provide you with a closing cost estimate.

You’ll also receive a statement of estimated monthly payments, finance charges, and other information about the mortgage loan.

What Qualifies As A First Time Homebuyer In New Jersey?

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 New Jersey 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 team of experienced attorneys and staff can guide you to buy your dream house in NJ. In this article we were able to explain the general process but it can be complex.

Buying a house in NJ is a big investment and you should consult an experienced real estate attorney to protect your rights. The cost of a lawyer is minimal compared to the purchase of your house, bank charges, moving expenses and other expenses. 

Therefore, it is important to have specialized advice by your side. Whether you are buying or even selling a house in New Jersey, you will find the assistance you require in Curbelo Law. Don’t hesitate to contact us today.