New Jersey Buying Guide
- New Jersey is unique because it has different rules for different parts of the state. Basically, if you are in the northern part of the state, the transaction will need to be closed by an attorney. However, if you are in the southern part the transaction can be completed by title agency.
- There is usually an attorney review at the beginning of the process.
- The buyer and seller will likely complete the purchase simultaneously at the same table.
- There are also unique environmental features, and unused heating-oil tanks could be found on old New Jersey properties. These tanks need to be decommissioned.
Phase 1: Review, Inspections, and Negotiations
- First, an offer will need to be accepted by the seller and a contract will be signed.
- There is now a 72-hour attorney-review process. Changes can be made during the review, but they need to be agreed upon by both parties.
- A good faith deposit is created. This is essentially a deposit from the buyer that is placed in escrow, and it represents their full intention to purchase the home.
- The buyer can now perform inspections if desired. Inspections are usually detailed in the contract. There is a due date for these inspections, called the “inspection contingency date.” The specific type will vary, but in New Jersey buyers typically get a general inspection as well as inspections for pests, lead paint, and asbestos.
- Certification and inspection of buried oil tanks will be required for older homes. In New Jersey, as well as other northern-Atlantic states, homes were often heated with oil that was stored in buried tanks. These now create environmental hazards, so an inspection and decommission may be required. Decommission is often a condition of sale.
- New Jersey has specific laws for wells. If a well is on site, it will need to be tested and approved. Approval is often a condition for the purchase that will be described in the contract.
- Many properties in New Jersey have buried septic tanks. These will need to be tested and approved before the sale.
- A survey of flood risk and potential flood damage will also be needed.
- In the state of New Jersey, a “certificate of occupancy” is required. This document states that the property can be safely lived in and that it is within all codes and zoning laws.
- New Jersey also requires a smoke-detector certification.
- Depending on the outcome of these inspections, the buyer may request repairs or a change in the purchase price. Sellers can agree to the changes, decline to make any adjustments, or offer a compromised solution. The buyer and seller can then negotiate as needed.
- Once this phase is complete, the buyer will remove the inspection contingency and the contract is ready to move forward.
Phase 2: Securing the New Jersey Mortgage
- Once you find a home to purchase, you’ll need to submit a mortgage application. This can be done independently or with the help of a mortgage professional.
- The lender will send a good faith estimate, which is their best calculation for final closing cost. This is usually accurate, but the final exact number may vary.
- The borrower will now need to send a variety of financial documents. Exactly what you need to send will depend on the loan product and the lender, but you may be asked to provide:
- Several months worth of bank statements, including all bank accounts you may own.
- Information on outstanding liens and debts on any of your properties.
- Tax returns for at least the past two years.
- Recent pay stubs and other information related to your income.
- Disclosures that are important to your financial situation. This can include marriage licenses, divorce decrees, child support, alimony, and more. (Whether you receive or make payments, they should be included.)
- Explanation of credit inquiries. Credit inquiries indicate a potential risk to your financial situation, so lenders will want information on these events.
- Information on large deposits. If there is a large deposit that is not part of your regular income, the lender will require information. This can include documentation and proof that the payment is a gift and not a loan. If it is a gift, the lender may require a gift letter that describes the nature of the payment.
- The lender may also request verifying or duplicate information. This is simply to provide deeper context to your financial situation and support your application. Remember, the more information you can provide, the better your chances of mortgage approval.
4. The New Jersey lender will issue a decision and (assuming you are approved) send a loan commitment letter. This will state their willingness to support your purchase.
5. The loan contingency date is removed. In some cases, an extension may be requested if the borrower has not yet received a loan commitment letter.
6. The conditions of the letter may include an appraisal. The appraisal will be ordered by the lender or the mortgage agent. It’s not possible to order a specific appraiser, but the mortgage agent can reject a specific appraiser if they feel the need.
7. If the appraisal comes in low, changes to the purchase contract and loan may be required.
8. Homeowner’s insurance will be ordered at this time.
The loan process can be long and complicated. Therefore, it’s best to start as early as possible.
Phase 3: Closing the Deal
In New Jersey, the closing will take place at one table with all parties at the same time.
- Before the closing, a title search will be performed. This will determine if there are any existing liens or assessments on the title. Assuming the title is clear, the closing can continue.
- The buyer’s attorney will start preparing the documents before the closing.
- They will start preparing the deed and title to be transferred to the new owner. They will also begin preparations for title insurance and a final closing will be scheduled.
- A final number for the buyer’s total closing cost will be calculated. The buyer will need to bring this payment in the form of a cashier’s check. This can include property taxes,the downpayment, utilities, and closing costs.
- Before the closing, most buyers will perform a final walkthrough of the property. This simply ensures the home is still in good condition.
- The buyer and seller will sign all the remaining documents to complete the purchase process.
- The buyer will now pay the final funds for the downpayment to an attorney or title-company representative.
- The transaction will now be recorded. New ownership will be documented with the New Jersey city or municipality where the property is located.
- The buyer gets their keys and can now move into their New Jersey property!
Loan Limits in the State of New Jersey
Loan limits across the country are set by the FHFA. Using home prices in each county, they set a limit for conforming loans. While there are options for larger mortgages (namely jumbo loans), these are the limits for many government-supported loans.
In New Jersey, a large portion of the state is under the base loan limit, which is $548,250 for a single-family home and $702,000 for a two-unit property. The limit for a three-unit property is $848,500 in the state of New Jersey, while the limit for a four-unit is $1,054,500.
There are, however, many New Jersey counties with higher loan limits. Most of these are located in the northern portion of the state. New Jersey counties with larger conforming loan limits include:
- Bergen
- Essex
- Hudson
- Hunterdon
- Middlesex
- Monmouth
- Morris
- Ocean
- Passaic
- Somerset
- Sussex
- Union
In these counties, the limit for a single-family home is $822,375. Buyers can purchase a two-unit property for $1,053,000 and a three-unit for $1,272,750. If you want a four-unit property using a conforming loan, the limit in these New Jersey counties is $1,581,750.
Downpayment Assistance Programs in New Jersey
If you want to purchase a property in New Jersey but are struggling with a downpayment, there are options. Many government offices and non-profit groups offer downpayment assistance (DPA) to aspiring homeowners in the Garden State.
Here are some examples of programs currently available to New Jersey buyers…
State Programs for New Jersey Residents
The most important organization for DPA programs in the state is the New Jersey Home and Mortgage Finance Agency (NJHMFA), which offers generous support to eligible buyers.
NJHMFA’s Downpayment Assistance Program
While the organization is responsible for a few other programs, the most significant DPA option is simply called the “Downpayment Assistance Program.” This option gives buyers access to as much as $10,000 that can be used for a downpayment or closing costs. While the support comes as a loan, there is no monthly payment and, under certain circumstances, the loan can be entirely forgiven. Buyers in New Jersey should first see if they are eligible for support through this program.
Major Local Programs in New Jersey
Newark Home Closing Cost Program
Newark, the largest city in New Jersey, offers a variety of improvement and homeownership options, including the Home Closing Cost Program, which provides as much as $10,000 in support. This is offered as a loan, and 20% of the loan can be forgiven for each year that you remain in the property.
Jersey City Golden Neighborhood Homeownership Program
To increase homeownership, Jersey City offers residents an assistance program that is available to eligible buyers purchasing a house for $150,000 or less.
Patterson First Time Homebuyers Program
To enhance homeownership in the city, the government of Patterson offers a downpayment option that is available to low- and moderate-income homebuyers.
Common Requirements for New Jersey Downpayment Assistance
These programs come with a wide variety of requirements. Many will require that you complete homeowner education, which is usually a short class that covers the basics of mortgages, taxes, home care, and overall responsible ownership.
Programs may also have credit requirements, and some have a requirement that you contribute at least a small amount to the purchase. (Usually around $500.)
The most common requirement is an income restriction. Because they are intended for moderate buyers, they often limit total incomes. For example, the Patterson DPA program is limited to buyers who have incomes of 80% or less than the area’s median income.
New Jersey downpayment assistance is constantly changing. For more information on current programs and eligibility, contact our team right away!
