Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In New Jersey, the average 30-year fixed mortgage rate is 5.44% — up from 2021's historic lows. This raises the average monthly mortgage payment to $2,129 (assuming a 20% down payment at the median home value).
But buying a home in New Jersey is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in New Jersey with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtorto guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in New Jersey want you to contribute 20% of the purchase price as a down payment. That would be $94,344 for a $471,719 home — the typical home value in New Jersey.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum down payment (%)
Down payment ($)
Based on typical home values from Zillow (August 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on home values from Zillow (August 2022) and a 5.44% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
New Jersey down payment assistance programs
The state of New Jersey offers a number of down payment assistance (DPA) programs for first-time and low-income homebuyers. These programs can provide financial aid in the form of a grant or second mortgage to help you pay for closing costs or a down payment.
Here are some options in New Jersey that you may be eligible for:
NJHMFA Down Payment Assistance Program
The New Jersey Housing and Mortgage Finance Agency (NJHMFA) offers a DPA program for first-time homebuyers and those who haven't owned a home in the past three years. Eligible participants can receive an interest-free second mortgage for up to $10,000 for a down payment or closing costs.
This program is limited to those who have an NJHMFA first mortgage and meet maximum household income limits for their county.
U.S. Department of Housing and Urban Development
Additional DPA programs and resources in New Hampshire are available on the state's HUD page.
Step 2: Find a great real estate agent in New Jersey
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in New Jersey.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in New Jersey will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your New Jersey home.
Step 4: Choose the right location
Currently, the typical home value in New Jersey is $471,719, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Jersey City:
Home value appreciation in Jersey City
Step 5: Start house hunting in New Jersey
Searching for homes in New Jersey is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in New Jersey can have a big impact on your number of options. For example, in New Jersey, May has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in New Jersey. Historically, there are 47.8% fewer homes for sale than during New Jersey's peak season.
Housing inventory in New Jersey by season
New listings per month
Based on data from Realtor.com (October 2022)
Step 6: Make an offer
Once you find a New Jersey house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in New Jersey, homes stay on the market for 61 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, New Jersey homes sell fastest in June, where the average property is only on the market for 50 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in December, you have a bit more time to search. Homes typically stay on the market 20 days longer than New Jersey's annual average.
Average time homes spend on market in New Jersey
Based on data from Realtor.com (October 2022)
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
Home inspections in New Jersey
Having your New Jersey home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
New Jersey-specific inspections
New Jersey’s disclosure laws require sellers to divulge any known issues to interested buyers before closing. However, buyers still need to take necessary precautions to ensure that there aren't any hidden problems with a property.
In addition to a general home inspection, buyers are recommended to complete more specialized tests, such as:
- Radon testing: Radon is one of the leading causes of lung cancer, and it can enter a home without detection. If the seller hasn't performed a radon test in the past year, consider having a test done before closing. You can order a radon test kit by visiting New Jersey's Department of Environmental Protection page here.
- Pest inspection: Some lenders require borrowers to have a termite and pest inspection completed, but buyers should consider getting one done regardless. Infestations can spread without warning and cause structural damage to a property, so early detection is vital.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
Step 8: Close on your new home!
On closing day, you'll meet at the title company to complete the transfer of your New Jersey home. Plan to spend a few hours completing some legal paperwork and settling your closing costs.
It's recommended to carefully review your paperwork ahead of time, if possible. The documents need to be completed perfectly for a legal transfer, so it's important that you fully understand each page before signing.
Some important documents to keep an eye out for will include:
- Your final loan application
- The deed
- The mortgage promissory note
- The disclosure statements
Once the paperwork is finished, you’ll be asked to pay your closing costs. The title company will make this easy by collecting the total sum you owe and distributing the correct amounts to every recipient on your behalf.
As a buyer, you can think of your closing costs being separated into four categories:
- Lender fees: Fees paid to your mortgage lender for originating and underwriting your loan. Sometimes, lender fees may cover additional costs associated with your loan, such as appraisal fees and survey fees.
- Title and escrow charges: Fees that the title company charges for their services. These fees are for conducting the closing process, performing the title search, and providing title documentation.
- Prepaid costs: Ongoing homeownership costs that are paid up front. Lenders sometimes require borrowers to pay certain expenses ahead of time, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous expenses that vary by homebuyer. Common expenses covered here can include natural disaster certification fees or real estate attorney fees.
Buyers in New Jersey typically pay 3–5% of the purchase price in closing costs. For a $471,700 home — the typical home value in New Jersey — that's between $14,151 and $23,585!
Frequently asked questions
In New Jersey it's required for a real estate attorney to be part of every home sale. While your agent can make recommendations, remember you get to make the final decision. Interview lawyers before hiring them to make sure they have the experience you need.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred New Jersey neighborhoods
- Partner with the right real estate agent in New Jersey
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes, the New Jersey Housing and Mortgage Finance Agency offers a First-Time Homebuyer Mortgage Program. Eligible buyers can receive a 30-year loan with a low fixed interest rate. Borrowers may also apply for the New Jersey down payment assistance program, which offers up to $10,000 as an interest-free, forgivable loan.
Purchase price limits and household income limits apply. The maximum amounts vary by county, but target areas tend to have higher limits.
Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.