Everything You Need to Know About Buying a House in New Jersey

From affordable starter homes to beautiful beachfront properties, New Jersey has everything a prospective home buyer could want.
Written by Jessie Devine
Reviewed by Melanie Reiff
The biggest draw for buyers looking to purchase a home in New Jersey is this: variety. If you want it,
New Jersey
has it, from dazzling shorefront properties to quiet farmland.
But if you’re a first-time homebuyer or if you’re new to New Jersey’s market, the home purchase process can be intimidating. That’s where
home insurance
comes in. In this homebuyer’s guide, we’ll navigate the steps of buying a home with a focus on details specific to the Garden State.
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Figure out your finances

The first step in the process is to sort out your financial situation. You need to have a solid understanding of your
credit score
, your debt-to-income ratio, and home purchase costs before you start house hunting in New Jersey.
There’s not much worse than falling in love with a home only to find out that you won’t
Instead, sit down with a calculator and your financial records to calculate what kind of house you can afford in New Jersey

Check your credit score

If you don’t already know your credit score, check it. Many credit card companies track your FICO score for free if you’re a cardholder. If you can’t find it that way, take a look at one of the three major credit bureaus: Experian, Transunion, and Equifax.
To buy a home with a conventional loan in New Jersey, you’ll need a credit score of at least 620. If your credit score is below 620, you have a few options. 
  • Try to build your credit. This option is time-consuming, but if you’re also saving up for a down payment, it could work for you.
  • The Federal Housing Administration (FHA) and Veterans Administration (VA) offer mortgages for individuals with credit scores as low as 523 and 500, respectively. FHA loans have extra requirements to qualify, and only veterans and active service members can get a VA loan.

Calculate your debt-to-income (DTI) ratio

After you’ve found your credit score, check out your debt-to-income ratio (DTI). Your DTI is the ratio between how much money you have coming in every month versus how much is going out. 
To calculate your DTI, add up your monthly payments (debt) and divide that number by your gross monthly income. The following must be included in the debt part of your DTI:
  • Rent or mortgage payments 
  • Car payments
  • Student loan payments
  • Credit card payments
  • Alimony or child support 
If your DTI is above 50%, you will likely not qualify for a home loan in New Jersey. If you want to get a conventional mortgage, you’ll need a DTI at or below 36%. 
In that area between 36% and 50%? You may still qualify, but you’ll have to talk to your lender.

Determine your down payment 

The down payment is the amount of money you pay in cash when the bank finances your mortgage loan. A conventional mortgage requires a down payment of 20%
With typical home values in New Jersey around $432,000, you’ll need about $86,400 to put down—not including closing costs. 
If that seems like a lot, you’re not alone. One of the main barriers to home buyers at this time is the inability to save up for a down payment while paying rent. But don’t worry. If you’re not able to make a 20% down payment, you have some options:
  • FHA loan: A mortgage insured by the Federal Housing Administration for low- and moderate-income homebuyers. Down payments as low as 3.5% are accepted
  • VA home loan: A mortgage insured by the Veterans Administration for service members, veterans, and eligible surviving spouses. These can be 0% down loans with low interest rates and low closing costs
  • First-time homebuyers program: New Jersey’s
    first-time homebuyers program
    applies to anyone who hasn’t owned a home in the last three years.
  • Income and home purchase price limits. Provides buyers with a  $10,000 interest-free, five-year forgivable second loan to cover down payment and closing costs

Prepare for closing costs and other fees

If you’re looking into buying a home, you’ve probably heard the term “closing costs.” What are these, exactly?
Closing costs are the costs associated with the sale of the home, including the following:
  • Home appraisal fee (required by most lenders)
  • Credit reports
  • Title searches and insurance
  • Surveys
  • Home inspection fee
  • Mortgage origination fee
  • Mortgage insurance
  • Property taxes
  • Homeowners insurance
In New Jersey, all that usually adds up to 3-5% of the home’s total value. Looking back at that home value of $432,000, your closing costs would fall between $12,960 and $21,600.
One reason these numbers are so high is that they include property taxes, and New Jersey’s property tax rate is the highest in the country at 2.42%.
The state does offer property tax breaks for senior citizens, veterans, and disabled individuals, so if you fall into any of those categories, be sure to take those deductions.
Key Takeaway Closing costs can be expensive and property taxes are high in New Jersey. Save up and look for deductions where you can.

Look for homeowners insurance

Homeowners insurance
can factor into your closing costs, but it’s an expense you’ll have to keep paying long after closing. 
Homeowners insurance in New Jersey costs on average $1,744 per year. If you live near the coast, you’ll want to purchase flood insurance in addition to your homeowners policy.
We know the home buying process is long and complicated, but don’t rush this step. Compare rates from multiple insurance companies to find the best coverage for the lowest rate. 
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Get preapproved for a mortgage

After you’ve sorted out the financials, it’s time to get preapproved for a mortgage. Getting preapproved shows sellers that you’re capable of and serious about buying. It also gives you a jumpstart on the mortgage approval process.
Here’s how to do it:
  • Shop around for the best interest rates. Don’t discount local banks and credit unions.
  • Compile your banking information, employment history, assets, debts, and tax info
  • Fill out a mortgage application
The preapproval process is straightforward, and your lender will guide you through it. However, it’s important to wait until you’re ready to buy to start. 
If you’re not financially prepared enough to get approved, the hard credit check performed by the lender will ding your credit score and make it harder to get approved later.

How to pick the right mortgage in New Jersey

Choosing the right mortgage is all about shopping. Your main points of comparison should be the interest rate and the mortgage term, and you’ll also have to decide on a fixed-rate or adjustable-rate mortgage.
The mortgage term is the length of the loan, most commonly 15 or 30 years. A 30-year term involves lower monthly payments but a higher interest rate (so you’ll pay more overall). A 15-year term, conversely, has a lower interest rate but higher monthly payments. 
From there, the two types of mortgages are fixed-rate and adjustable-rate. A fixed-rate mortgage has an interest rate that won’t change, meaning that the monthly payments will remain the same over the life of the loan. It’s good for a buyer looking for payment stability.
An adjustable-rate mortgage has variable interest rates that go up or down with the market. While these loans can start with lower interest rates, it’s important to read the fine print to find out how much your rate can increase.
Key Takeaway Different types of mortgages have different pros and cons. Talk to your lender to find the best one for you.

Look for a house

After you’ve obtained preapproval, it’s finally time to look for a house!

Pick your city or neighborhood 

New Jersey has lots of variety. If you want nightlife and a big city feel, try
. Want to get close to nature? Try a small town like Alloway. Crazy about the beach? Try looking in Beach Haven or Lavallette.
Other considerations to make are the cost of living, culture, and climate. If you have kids, consider school district quality. Research the area’s crime rates and don’t forget to take the cost of
home and car insurance
into consideration.
Besides the location, make a list of your must-haves in a home. How many bedrooms do you need? Do you want a yard? Preparing this list will help you and your agent find your dream home.

Buyer’s market vs. seller’s market

When shopping for real estate, it’s important to know whether you’re entering into a buyer’s market or a seller’s market. 
  • In a buyer’s market, the supply of homes outweighs demand, and you may be able to negotiate a better price
  • In a seller’s market, there are more prospective buyers than there are available houses, so houses will go quickly—sometimes for more than the asking price
If you’re unsure if you’re in a buyer or seller’s market, you can ask your agent or do a quick online search. 
Check recent home sales in the area and compare the asking price to the selling price. If the final selling price is consistently higher than the original asking price, it’s a seller’s market. 
Another good indicator is the time a house spends on the market: in a seller’s market, houses sell quickly. In a buyer’s market, they can linger for weeks or months.
Key Takeaway Once you choose your home location, find out whether you’re in a buyer’s or seller’s market to decide on a shopping strategy.

Find a real estate agent

If your house hunt feels a little overwhelming, hire a real estate agent. It’s not a requirement in New Jersey, but real estate agents know the ins and outs of the home search and purchase process. 
They’ll also be able to provide you with listings that you won’t find using sites like Zillow.

Make an offer

So you’re financially ready, you’ve hired a real estate agent, and together you’ve found your dream home! Now it’s time to make an offer.
A real estate agent can help you calculate the best offer based on the market and fill out the paperwork to submit it to the seller.

How to save on homeowners insurance

Nobody wants to think about insurance when they’re doing something exciting like buying a new house. But the last thing you want is for your brand-new home (a big investment) to become damaged and cost you thousands out-of-pocket. 
Luckily, the insurance shopping process is quick and easy when you have insurance super app
on your side. Jerry can compare rates from top companies in 45 seconds and help you
bundle your home and auto policies
for savings. 
was wonderful! I used it for my auto and renters policies. I trusted it so much that I signed up my homeowners insurance under Jerry as well. All of the agents are amazingly nice and knowledgeable.” —Mary Y.


The exact amount of money you need in your pocket will vary depending on where you’re buying, how big of a down payment you want to make, and what type of mortgage you want. 
With New Jersey homes averaging around $432,000, this is around $100,000 for a conventional loan or around $30,000 for lower down payment programs like FHA.
You need a credit score of at least 620 to buy a house with a conventional loan in New Jersey. 
You can still qualify for an FHA loan or a VA mortgage if your credit score is at least 500.
If you’re going for affordability, check out Somerdale or Barrington. If you want luxury, look at more expensive areas like Englewood Cliffs or Asbury Park.
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