Buying a Home in New Jersey

How Much Home Can I Afford?
This calculator will help you get a quick estimate of what type of house payment and loan amount you can afford based on your current total monthly income and debt payments.

Home Buying Information Checklist
Take this handy checklist with you while you search for the home of your dreams in NJ! Print copies to compare home prices and amenities.

Financing Checklist - Use this handy guide to organize important financial information as you begin to prepare to buy a home in NJ.

HOT TIP - Buying a home is a major decision and, even under the best circumstances, can have an emotional impact. If you're feeling anxious or stressed, take time out to do some stress releiving exercises. Taking a walk around a new neighborhood can be great exercise and impart some valuable information about possible new neighbors.

Mortgage Questions Asked Frequently by Home Buyers

1. What factors will a lender consider when I apply for a mortgage?
2. What is a mortgage pre-approval?
3. What if my credit is poor?
4. Is there a minimum down payment needed to purchase a home?
5. Will I need Private Mortgage Insurance?
6. What closing costs will I typically have to pay?
7. Does paying discount points make sense?
8. Fixed-rate or adjustable-rate loan?
9. When does it make sense to lock my rate?
10.What is included in my mortgage payments?

1. What factors will a lender consider when I apply for a mortgage?
Lenders usually focus on four areas when evaluating a mortgage loan application as follows:
Income from all sources and non-mortgage debt. The lender will review your income from all sources and the amount of other (non-mortgage) bills you have to pay to help determine whether you can afford to make mortgage payments.
Available Funds. The lender needs to make sure you have enough readily available funds to buy a home.
Credit. The manner in which you've handled other financial obligations helps the lender predict whether you will pay your mortgage loan consistently and on time.
Appraised Value of Property. The home must be worth enough to act as collateral for the mortgage loan.

2. What is a mortgage pre-approval?
A mortgage pre-approval is a loan commitment from your mortgage company received before you have found a home, based on a review of your credit and finances. Having this pre-approval shows sellers that you're a serious and qualified buyer. It also helps you establish a clear price range for your search. The process is the same as a typical mortgage application, except that your application doesn't include property information.

3. What if my credit is poor?
Your credit rating is only one factor considered in qualifying for a loan, and having made some late payments doesn't have to keep you from buying a home. Someone who has consistently made payments on time in the past may have more financing options than someone who has not, but that doesn't mean a mortgage cannot be obtained if your credit is poor. The mortgage bankers I work with may be able to recommend various mortgage options to help those with less-than-perfect credit become homeowners.

4. Is there a minimum down payment needed to purchase a home?
Generally, the answer is no. Many buyers believe they must be able to put down as much as 20% of a home's purchase price. While that may have been true in the past, there are many mortgage options available today which require little or no down payment. Indeed, homeownership would not be possible for many people if not for these low-down-payment options.

5. Will I need Private Mortgage Insurance?
Private Mortgage Insurance (PMI) protects the lender in the event the buyer is unable to repay the mortgage loan. PMI is usually required for mortgage amounts higher than 80% of the home's value. That means that if your down payment is less than 20%, you will probably have to pay for PMI. However, one common way of bypassing PMI without making any down payment at all is to use an 80/20 program, which combines a first mortgage with home equity financing.

6. What closing costs will I typically have to pay?
Closing costs vary based on a number of factors but usually include the following:
Bank fees. Your mortgage bank may charge for expenses related to making the loan, including an appraisal fee, a credit report fee, origination points, and discount points.
Other parties fees. Charges for services not provided by your bank often include the settlement fee, title insurance, and attorney's fees.
Prepaid items. Certain mortgage costs must be paid to your mortgage bank in advance. The most common of these are pre-paid interest, homeowners insurance, and deposits to set up an escrow account.

7. What are discount points? Does paying points make sense?
Discount points, each of which is equal to 1% of the loan amount, are prepaid interest, which you pay to your mortgage bank at closing in exchange for a lower interest rate on your mortgage. Paying discount points is also called 'buying down' your rate.

Does paying points make sense? The answer depends primarily on how long you plan to stay in your home. Depending on how much lower your monthly payments will be if you pay points, calculate how long it will take for the monthly savings to add up to the cost of the points. If, for example, it would take five years to break even and you're planning to live in your home for 10, paying discount points may be a smart move.

8. Fixed-rate or adjustable-rate loan?
Mortgage loans usually have either a fixed interest rate or an adjustable interest rate. A fixed-rate mortgage has an interest rate which never changes and its payments remain stable throughout the life of the loan. An adjustable-rate mortgage (ARM) has an interest rate which changes at regular intervals - - usually once every year - based on a formula that uses a market index. For most ARM options, rate adjustments begin after an initial period - usually between three months and ten years - during which the rate is fixed.

A fixed rate is usually best if you plan to stay in your home for the long term and are buying at a time when rates are relatively low. An ARM is usually best if you plan to move before the rate adjustments begin, or if you are buying when rates are relatively high.

9. When does it make sense to lock my rate?
Locking your interest rate means the rate on your loan will remain unchanged from when the commitment is issued even if market rates change before closing. Most mortgage banks will allow you to lock your rate for 30 to 60 days, with the option to extend the rate-lock period for a fee. Whether or not you lock your interest rate depends on whether you expect rates to rise or fall before you close on your home.

10. What is included in my mortgage payments?
The monthly mortgage payment is usually broken up into the following components:
Principal, the total outstanding balance of the loan.
Interest, the cost of borrowing money.
Real Estate or Property Taxes, levied on the property by the local government.
Homeowners or Hazard Insurance, which protects the owner and the mortgage bank from losses caused by fire and other natural hazards.