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What to Know About Buying a Home in New Jersey
Buying your first home can be a challenge. But there is a lot of help available. The Garden State offers a wealth of tips, advice, and educational courses for first-time buyers.
And you might even be in line for some serious financial help with your down payment and closing costs. New Jersey offers many assistance programs for first-time buyers. Here’s how to get started.
Check Your Eligibility to Buy a Home in NJ (July 9, 2021)
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Overview of Home Buyers in New Jersey
Home prices in the Garden State rose 24% between the first quarters of 2020 and 2021. Thus, first-time buyers in the state may wish to take advantage of the assistance programs described below.
| Overview of Home Buyers in New Jersey | |
| Average selling price of a house | $ 500,630 |
| Minimum deposit in NJ (3%) | $ 15,020 |
| 20% deposit in NJ | 100 $ 130 |
| Average credit score in New Jersey1 | 721 |
| Maximum subsidy to NJ buyer2 | Up to $ 40,000 for down payment and closing cost assistance in Jersey City |
Down payment amounts are based on the state’s most recent average selling price. The “minimum†down payment assumes a 3% down payment on a conventional mortgage with a minimum credit score of 620.
If you are eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the United States Department of Agriculture), you may not need a down payment at all..
Mortgages for First-Time Home Buyers in New Jersey
If you’re a first-time home buyer in New Jersey with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).
Of course, few first-time buyers have saved enough for a 20% discount. But the good news is, you don’t need a lot of them. Not by far.
Borrowers can often move into a new home with as little as 3% or even 0% down payment by using one of these low down payment mortgage programs:
- Conventional 97 – From Freddie Mac or Fannie Mae. 3% down payment and minimum credit score of 620. You can usually stop paying mortgage insurance after a few years.
- FHA loan – Supported by the Federal Housing Administration. 3.5% down and a minimum credit score of 580. But you are obligated to take out mortgage loan insurance until you refinance with another type of mortgage, move out, or pay off your loan.
- VA loan – Only for veterans and military. No deposit is required. Minimum credit score varies by lender, but is often 620. No mortgage insurance outstanding after closing. These are arguably the best mortgages available, so apply if you qualify.
- USDA loan – For low to moderate income people who shop in designated rural areas. No deposit required. Credit score requirements vary by lender, but are often 640. Low mortgage insurance rates
- New Jersey Mortgage and Housing Finance Agency Loan Programs – May include competitive interest rates and down payment assistance. More info below
Depending on the mortgage you choose, you could potentially move into your new home with minimal cash out of pocket.
These programs even allow you to use donated cash or down payment assistance (PAD) to cover the down payment and closing costs.
If you’re not sure which program to choose for your first mortgage, your lender can help you find the one that’s right for you based on your finances and home buying goals.
Find the best first-time buyer loan for you (Jul 9, 2021)
New Jersey First-Time Home Buyers Programs
The New Jersey Housing and Mortgage Finance Agency (NJHMFA) says it is “happy to offer step-by-step advice and accessible tools to help you make the right home buying decision.”
A good place to start is to download The Road Home New Jersey: A Guide for the New Jersey Homebuyer from their website. It is also available in Spanish.
If you are looking for help with your mortgage, the NJHMFA can put you in touch with one of its approved mortgage lenders.
If you qualify, the lender should offer you a competitive 30-year fixed rate mortgage. This will be a government insured loan backed by the FHA, VA, or USDA (depending on your eligibility for each program).
To qualify, you will need to be:
- A first-time home buyer
- Within local household income limits
- Buy a property within the limits of the purchase price
- Buy the house as a primary residence
This PDF will show you the earning and selling price caps where you want to buy in most states. And this one gives similar details if you are buying in an urban target area.
If you want financial assistance for your down payment and closing costs, you will need to use one of the participating NJHMFA lenders.
Grants for First-Time Home Buyers in New Jersey
The NJHMFA can provide a down payment and closing cost assistance of up to $ 10,000.
Technically, it starts off as a loan – not a grant. But the loan is interest free and you do not make any monthly payments. Best of all, it’s forgiven after you’ve lived in the house for five years without selling, refinancing, or prepaying your loan.
In other words, subject to these conditions, the down payment loan turns into a grant after five years and you don’t have to pay back a dime.
As described in the previous section, you will need to obtain an FHA, VA, or USDA loan as the first buyer to be eligible. And you will have to meet income and house price caps.
Keep in mind that this is a statewide DPA program. There are probably other aid programs at the local level. So talk to your real estate agent and / or loan officer about the other options where you are considering buying.
Check Your Eligibility to Buy a Home in NJ (July 9, 2021)
Buying a home in major cities in New Jersey
Home prices in New Jersey cities are rising at very different rates.
In Newark, for example, they had only increased by 2.4% year-on-year in May 2021. But in Paterson, they had grown an extraordinarily 45.7% over the same period.
Most of us have to move to a particular city for work or family reasons. But, if you have flexibility with the job and location, you might want to pick the real estate market that’s right for you, maybe even if it’s a bit outside of your favorite city.
First-time home buyers in Newark
The median price for real estate listings in Newark was $ 359,000 in May 2021, according to Realtor.com. This increased by 2.4% year-on-year.
If you want to buy a home at this median price, your down payment options may be between:
- $ 10,770 for 3% deposit
- $ 71,800 for 20% deposit
Newark itself does not appear to have its own home buying assistance programs. But it is located in Essex County and it is. Unfortunately, there is little information available online. But you can call (973) 655-0200 to learn more about Essex County’s down payment assistance programs.
First-time home buyers in Jersey City
The median price for real estate listings in Jersey City was $ 640,000 in May 2021, according to Realtor.com. It was up 20% year over year.
If you want to buy a home at this median price, your down payment options may be between:
- $ 19,200 for 3% deposit
- $ 128,000 for 20% deposit
Jersey City’s Golden Quarter Home Ownership Program can provide loans of up to $ 40,000 for down payment and closing costs to first-time buyers who buy in the city.
Its technical sheet seems quite outdated. But you can call (201) 547-5000 for current information.
Paterson first time buyers
The median price for real estate listings in Paterson was $ 335,000 in May 2021, according to Realtor.com. This was up 45.7% year-on-year.
If you want to buy a home at this median price, your down payment options may be between:
- $ 10,050 for 3% deposit
- $ 67,000 for 20% deposit
If Paterson City has a down payment assistance program, the information is not up to date online. But you can call (973) 321-1600 to see what is currently on offer.
Where to Find Help Buying a Home in NJ
All of the organizations we’ve listed above should provide free advice to any first-time home buyer in the state of New Jersey.
In addition to our selection, the US Department of Housing and Urban Development (HUD) provides some statewide, regional, and local resource listings:
State and regional resources accessing property
Resources for First-Time Home Buyers in New Jersey by County
What are the mortgage rates today in NJ?
You can see today’s live mortgage rates in New Jersey here.
When you’re ready to begin the home buying process, make sure you get personalized quotes from at least 3 mortgage lenders.
Don’t just look at the rates advertised online; apply for pre-approval and compare the interest rates and fees available to you. This is the only way to know that you are getting the best possible deal on your new home loan.
Check your new rate (Jul 9, 2021)
1 Source: Experian.com 2021 study on 2020 data
2Based on a review of available DPA grants from the state at the time of writing this article
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