Buying a House in NJ: Everything You Need to Know

New Jersey is home to beautiful beaches, a rich history, and vibrant communities. Many potential homebuyers are wondering whether it’s a good time to buy a house right now in New Jersey - and if so, what they need to know before they start the process.

If you’re thinking about buying a house in New Jersey, here’s what you need to keep in mind.

Is it a good time to buy a home in New Jersey?

If you don’t yet own a home, you might be hoping for the housing market to crash - or at least dive down a bit. That’s what happens when prices get too crazy, right?

Unfortunately, the opposite will likely be true - home prices will continue to rise for the next several years, albeit at a slower pace than previously. The longer you wait to buy, the longer you wait to put equity in your own pocket, rather than your landlord’s.

Here's what the NJ real estate market currently looks like:

Redfin data:

• Median sale price: $443,200 (+7.3% YoY)
• Number of newly listed homes: 6,582 (-25.8% YoY)
• Number of homes sold: 7,759 (-30.4% YoY)
• Months of supply: 3 (+0 YoY)
• Median days on market: 46 (+6 YoY)

Home prices as of Nov. 2022 were up 7.3% since the same time last year. And interest in the Garden state shows no signs of slowing down: as New Yorkers and other big-city employees find themselves able to work remotely year-round, escaping to relatively affordable Jersey - or opting to live year-round by the Jersey Shore - becomes a viable alternative.

Months’ supply of inventory has remained steady at three months, which is good news for home sellers. Most experts agree that a market becomes balanced at around five months of housing inventory - after which, it enters a buyer’s market where buyers have the most negotiating power. Similarly, a decreasing number of homes for sale helps keep prices high due to increased competition.

However, buyers may note that median days on market are increasing - rising interest rates have driven some buyers away, and sellers may need to start offering more concessions or price reductions to get their homes sold on a timeline that works for them. 

So the answer to “are home prices dropping in NJ?” is no. If anything, you can expect them to keep rising - so don’t delay out of misplaced hope for a housing crash.

Taxes 

When a home is purchased in New Jersey, the seller needs to pay a 1% Realty Transfer fee - so as the buyer, you don't need to worry. The exception: buyers are required to pay an additional 1% fee for homes that sell for $1 million or more (this is known as the "Mansion Tax"). 

Home owning residents of New Jersey can potentially qualify for property tax relief benefits, credits, or deductions, including programs like the Homestead Benefit program (now known as ANCHOR); Senior Freeze payment (Property Tax Reimbursement). These benefits typically benefit primary homeowners (so it won't be applicable for a vacation property).

If you haven’t owned a home in New Jersey before, the property taxes may come as something of a surprise. The average effective tax rate in New Jersey is 2.42%, the highest in the country. That means that if your home is valued at $400,000, you can expect to pay $9,680 in property taxes per year.

How much do you need to make to buy a house in New Jersey?

There is actually no right “amount” of income needed to make in order to buy a home. Why? Basically, what happens when you want to buy a home is that you visit a mortgage advisor (or Realtor). They will look at everything from your income, to your credit score, to your debt. 

If you make $60,000 but have to pay $300 each month in car payments and $200 a month to student loans, then you’ll qualify for a smaller loan than someone with your same salary, credit score, and so on if they don’t have the same debt-to-income ratio.

Other factors outside your control will influence your monthly mortgage payment. The average mortgage rate is constantly changing, for example. If your mortgage rate is lower, you will be able to buy a more expensive home than when the rate is higher. Property taxes also impact how much you can borrow.

How much money do I need to buy a home in New Jersey?

Wondering how much cash on hand you need to close on a home? As you can imagine, the answer to this question can vary. The answer largely depends on the home you buy, and a home in Camden, for example, might be half of the cost of a same-sized home in Cherry Hill. However, it’s possible to give an estimate for the average homebuyer.

Let’s say you’re a first-time homebuyer with a good credit rating buying a $400,000 home in Trenton, NJ and you plan on putting 5% down.

• According to SmartAsset’s mortgage calculator, you can expect to pay roughly $10,100 in closing fees (this includes title insurance, origination insurance, inspection fees, prepaid expenses and more). You’ll also need about $20,000 for the down payment.
• In total you’d need approximately $30,000 in cash to buy this home.

Keep in mind, this number will be completely different depending on the home, your down payment, the location of your home, etc. Say you want the same home, but you plan on putting down 20% - the amount of cash you’d need at settlement would be closer to $90,000. 

These are just general estimates, of course. The best way to map out a financial plan for purchasing your home - and making sure you’re qualified to do so - is by meeting with a Realtor and mortgage advisor. They can let you know what you can actually afford - and how much money you will need on hand to close. Your agent will typically have access to all relevant information about a potential home and can give you a more precise estimate than online mortgage calculators can.

The home buying process in New Jersey

For the most part, the home buying process in New Jersey is similar to what you'd encounter anywhere else. 

"I think the biggest thing is that New Jersey is a much more attorney-based type state compared to a state like Pennsylvania. It’s much more common in Jersey, depending on where in Jersey you are. So if you're buying in North Jersey, you almost expect every transaction to have an attorney, whereas down here in South Jersey it’s like 50/50," notes Ruben Concepcion, a NJ-based Realtor.

"A buyer from PA doesn’t have to get an attorney, but there's a chance that a seller in New Jersey will have an attorney. And anytime I know the other side is using an attorney, I always give them the notice and recommend they get their own attorney so that there’s a level playing field," he adds.

NJ home assistance programs

First time homebuyers often don't realize there are programs and grants available to help them achieve their goals. Here's what's available in NJ:

NJHMFA Down Payment Assistance Program (DPA): provides up to $15,000 for qualified first-time homebuyers to use as down payment and closing cost assistance when purchasing a home in NJ. The DPA is an interest-free, five-year forgivable loan available to buyers working with an NJHMFA participating lender.

Ask your lender or Realtor what other options are available in your specific city/county. The city of Camden, for example, has a First Time Home Buyer Program - buyers can apply for a one-time deferred loan of up to $14,999 to assist with closing costs and down payment reduction.

Best place to buy investment properties in NJ

You might assume that the best place to buy an investment property is the hottest cities. However, hot cities are often expensive to buy into, and not as likely to appreciate quickly - because by the time they’re known as “hot cities,” everyone else has already bought in. 

According to Clever, Camden is one of the best cities overall for investment. The property appreciation rate is high, and many neighborhoods qualify as “up and coming” - especially as prices heat up in nearby Philadelphia. Nearly 7,000 students go to Rutgers University’s Camden campus, and aiming to rent specifically to college students near campus can provide a lucrative and stable income stream. 

If you're looking for a good investment property in NJ, the location isn't necessarily important as considering the fundamentals. If you're looking to rent out your property, for example, knowing a particular neighborhood's average rent price, as well as its average vacancy rate, are going to be more important evaluation tools than knowing an overall city's performance. 

So: Should you buy a house in New Jersey?

It may not be the best time in history to buy a house, but that doesn't mean it's a bad time for you to buy a home - especially if it gets you out of the rental cycle, or out of a home that no longer suits your present needs. 

"Depending on what interest rates are, don't be afraid to shop around for other options outside of the fixed rate that everyone is comfortable with," notes Concepcion.

Ready to chat with a local Realtor about your options?

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More on Buying a House in NJ

• How Much are Closing Costs in NJ? What You Should Expect to Pay
• Best Places to Live in NJ: 4 Neighborhoods for First Time Homeowners
• 16 Problems You Should Note on the NJ Seller Disclosure Form