First Time New Jersey Home Buyer Advice

1.  Means Test Your Budget

Many first-time home buyers are not sure how much to save or how much house they can afford. Your basic house budget should include your annual household income, your monthly debts and expenses, and the amount you expect to put down on your home purchase. While this calculation will give you a basic idea of how much house you can afford, the true calculation is much more advanced.



Your credit score, the interest rate you are likely to get, the term of your loan, mortgage insurance, property taxes, and general spending habits all influence the affordability of your home purchase.

The best way to determine if you can afford any given home you are considering purchasing is to do a means test on your own. Determine your likely monthly housing costs for your ideal home. Make sure you include estimated property taxes and any insurance premiums. For three to six months, compare those costs to your budget. Better yet, transfer what you would pay into a savings account every month. Month-to-month, could you cover these costs with your current budget? Are you coming up short every month?

If you can easily afford your projected homeowner expenses, you’re likely ready for homeownership.

2.  Boost Your Credit Score

While you are working on your budget, try to boost your credit score. A good credit score can open up financing opportunities. For buying a home, a credit score above 700 is ideal. That said, certain first-time homebuyer loans allow lower credit scores, sometimes as low as 500. However, a higher score will save you money in most cases. Lenders use your credit score to evaluate your risk as a borrower. The higher your score, the lower your interest rate is likely to be.

To boost your score, reduce your debt, make all payments on time, and avoid new credit applications in the months leading up to trying to get approved for a home loan. Even boosting your score by a few points can make a difference in your loan rate.

3.  Check Out First-Time Buyer Programs

As mentioned above, there are plenty of first-time home buyer programs available to prospective NJ homeowners who meet the requirements. These include:

• NJHMFA First-Time Home Buyer Program: This program offers reasonable, 30-year, fixed-rate loans for qualified buyers, including down payment assistance.
• Down Payment Assistance (DPA) Program: Homebuyers can receive up to $15,000 for their down payment and closing costs through a 0% interest loan that requires no monthly payments and can be forgiven after 5 years, as long as you have not moved or refinanced your home.

These are just two of the programs available to NJ homebuyers, with many others county-specific. Eligibility requirements include first-time homebuyer status, a minimum credit score of 620, and completion of a HUD-approved homebuyer education course. Some programs have income eligibility limits.

4.  Get Pre-Approved

Do not just get pre-qualified, get pre-approved. Working with a lender to get pre-approval status means you are vetted and ready to finance when you find a home you are interested in. This will alert sellers that you are a serious buyer and allow you to act quickly to make an offer. Pre-approval will also give you a great idea of how much house you can afford and the estimated rate you can expect on your loan.

5.  Create a Priority List

Create a priority list of your home must-haves. The big factors you need to consider are: size, location, price, condition, and essential features. Understanding your needs in these areas will help you narrow your search. Rank your priority list to determine what is a “need” and what is a “want.” You may want a laundry room, extra storage space, and a brand-new HVAC system, but you need to find a home within your budget and close to schools for your kids. Having these priorities ranked—and agreed upon if you are purchasing a home with a spouse—can help you make quick decisions.

6.  Work With Experienced NJ Professionals

The best thing you can do when beginning your first-time homeowner property search is to enlist the help of an experienced NJ real estate professional. Agents with experience in NJ real estate markets will be able to provide invaluable advice about homes that meet your needs (and maybe some of those wants!) within your budget and in the locations you want to live. Agents schedule showings, perform market analysis, negotiate on your behalf, coordinate inspections, and offer closing assistance. They have unique insight into different neighborhoods you may be interested in.



Another real estate professional you may want to consider is a real estate attorney. In NJ, every real estate contract enters a mandatory 3-day attorney review period after signing. This allows all parties to have a real estate attorney review the contract. A real estate attorney can work with you to protect your interests as you enter into one of the biggest investments you will ever make. Beyond the initial attorney review period, a real estate lawyer can help with title research, negotiate on your behalf throughout the transaction, and ensure a smooth closing.

First-Time Buyer Mistakes

If you follow the six tips above, you are likely to avoid these three common first-time homebuyer mistakes:

1.  Going Over Budget

If you have never owned a home, it can be difficult to gauge exactly how expensive owning one can be. You may have calculated your monthly mortgage payment, but you also need to consider taxes, insurance, and the costs of regular maintenance and repair. About 90% of NJ’s border is water, and around 53% of NJ properties will require some kind of flood insurance. If your home requires flood insurance, this may be an expense you did not factor into your housing budget. Real estate professionals can help you calculate a budget that covers every facet of homeownership.

2.  Skipping Inspection

A home inspection is not mandatory for many NJ real estate transactions. During the post-pandemic real estate market in NJ, buyers exiting urban areas were so desperate to buy in NJ suburbs that they were foregoing home inspections. But a home inspection is a critical part of the buying process. An inspection is a detailed, thorough report of the property's condition. Inspectors provide an in-depth report of any issues you may face as a new homeowner. If the issues are extensive, you could have cause to back out of the deal.

3.  DIY Homebuying

Overall, the biggest regret we see first-time buyers have is not working with professionals from the very beginning. Experienced NJ real estate professionals can save you time, stress, and money.



Veitengruber Law is a knowledgeable real estate attorney in New Jersey. We have years of experience helping NJ homeowners achieve their real estate goals. We love working with first-time home buyers! Call us today for a free consultation.