If you're thinking about buying your first home in New Jersey, one of your first questions is probably:
"How much money do I actually need?"
And no, the answer isn't automatically 20% of the price of the house.
The amount you'll need depends on your mortgage, purchase price, closing costs, negotiated contract terms, and individual financial situation.
But your down payment isn't the only expense you should prepare for.
Let's break it down.
1. Your Down Payment
Your down payment is the portion of the purchase price that you pay upfront rather than finance through your mortgage.
For example, if you purchased a $400,000 home and put 5% down, your down payment would be $20,000.
But 20% down is not universally required.
Some mortgage programs allow qualified buyers to purchase with considerably less money down. NJHMFA also notes that down payments can commonly begin around 3% or more, depending on the financing program and buyer.
The right amount to put down depends on much more than simply choosing the lowest percentage available.
Your lender can help you compare how different down payments affect your monthly payment, mortgage insurance, cash remaining after closing, and overall loan costs.
Learn more in my guide, Do You Need 20% Down to Buy a House in New Jersey?
2. Closing Costs
This is the expense first-time buyers sometimes forget.
Your down payment and closing costs are two different things.
Closing costs can include expenses associated with obtaining your mortgage and completing the purchase.
According to the Consumer Financial Protection Bureau, closing costs typically range from approximately 2% to 5% of the purchase price, excluding the down payment, although your actual costs depend on your loan, property, lender, location, and other factors.
For a $400,000 purchase, 2% to 5% would equal approximately $8,000 to $20,000.
That's a broad estimate, not a quote for what your particular closing will cost.
Your lender's Loan Estimate will provide much more useful numbers for your specific situation.
Internal link: Read my complete guide, What Are Closing Costs When Buying a House in New Jersey?
3. Deposit Money
When you make an offer on a house, your contract may provide for a deposit.
This is important because some first-time buyers hear the word "deposit" and assume it's another expense on top of everything else.
It isn't necessarily an additional cost in that sense.
Deposit money can ultimately be credited toward the amount you owe in connection with the purchase, subject to your contract and transaction.
The amount and timing depend on your agreement, so this is something we'll discuss when preparing your offer.
4. Home Inspection
Once you're under contract, you may choose to have the property inspected according to the terms of your agreement.
The cost will depend on the property, inspector, scope of the inspection, and any additional inspections or evaluations you choose or need.
This is one expense I would plan for before we start making offers.
Buying a home isn't just about having enough money to get the offer accepted. You want enough room in your budget to properly evaluate what you're buying.
5. Appraisal
If you're financing your purchase, your lender may require an appraisal.
An appraisal provides an opinion of the property's value for lending purposes.
Appraisal charges are among the common mortgage-related costs buyers may encounter.
Your lender can tell you how and when your appraisal fee will be collected.
6. Prepaid Expenses and Escrow
Here's another category that can surprise first-time buyers.
Some of the money due at closing may be related to expenses such as:
Homeowners insurance
Property taxes
Prepaid interest
Initial escrow funding
These aren't necessarily "fees" in the way people normally think about closing costs. Some represent expenses you're paying in advance or funds being placed into an escrow account.
The CFPB's Closing Disclosure guidance specifically identifies prepaids and initial escrow payments as components buyers may see at closing.
7. Moving and Immediate Home Expenses
Don't make the mistake of calculating exactly how much you need to close and planning to have $4 left in your checking account afterward.
You're going to own a house.
Something will eventually need attention.
You may also need money for:
Movers or a truck
New locks
Furniture
Appliances
Paint
Tools
Utility setup
Immediate repairs
An emergency fund
The CFPB recommends accounting for moving costs, renovations, furnishings, and an emergency cushion when deciding how much cash you can afford to put toward a purchase.
Personally, I'd rather see a first-time buyer keep some breathing room than become a homeowner with absolutely no savings left.
What About First-Time Homebuyer Assistance in New Jersey?
This is where things get interesting.
New Jersey has programs that may help eligible homebuyers with down payment and closing costs.
As of this writing, NJHMFA advertises statewide down-payment assistance of up to $15,000, depending on the county, for qualified first-time homebuyers using an eligible NJHMFA first mortgage. NJHMFA also offers additional assistance for qualified first-generation homebuyers, with total assistance potentially reaching $17,000 to $22,000 depending on eligibility and county. Program requirements and availability apply.
That doesn't mean everyone qualifies, and I don't want you planning your home purchase around assistance you haven't been approved to receive.
But it does mean it's worth asking a participating lender whether there are programs you qualify for.
So, How Much Should You Save?
There isn't one magic number.
Someone buying a $300,000 property with one mortgage program may need a very different amount than someone buying a $500,000 property with another.
Instead of asking:
"How much money does everyone need to buy a house?"
Ask:
"How much would I need to buy the kind of house I want?"
That's a question we can actually start answering.
Thinking About Buying Your First Home in South Jersey?
If you're trying to buy your first home in Camden, Burlington, Gloucester County, or elsewhere in South Jersey, don't count yourself out because you don't have 20% sitting in the bank.
Let's figure out where you actually stand.
Maybe you're ready now. Maybe you need six months. Maybe you need a year.
Either way, having a plan beats guessing.
Keller Williams Realty Cherry Hill: 856-685-1688
Contact me: 856-701-0440 | david.raymond@kw.com
New to the process? Start with my Step-by-Step Guide to Buying Your First Home in New Jersey.
This article is for general educational purposes and is not mortgage, legal, tax, or financial advice. Loan programs, costs, eligibility requirements, and assistance programs can change. Consult the appropriate licensed professionals regarding your individual situation.
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