Most of us know that to buy a house we need to get financing and look at a number of homes to find just the right one. Actually, though, there’s a lot more to it than that, and, unfortunately, many people aren’t aware of everything involved. As a result, they go into the process pretty unprepared and often get some big (often unpleasant) surprises along the way. Don’t be one of them. Instead, check out our overview of what you need to buy a house in New Jersey.
Finances and Credit in Order
So the first thing you’ll need to buy a house in New Jersey is to have your finances and credit in order. Basically, this means making sure you are in fact financially ready to buy.
You need to begin long before you actually start house hunting. Take a close look at “your current financial situation and [see] how it lines up with what mortgage lenders look for in a borrower, figuring out what you can afford and saving for a down payment and closing costs.”
You’ll also need to make sure you meet the minimum criteria to be able to secure a mortgage:
- A minimum credit score of 620 for a conventional loan or 580 for an FHA loan
- Good credit and payment history
- Proof of income and steady employment
- A debt-to-income ratio below 50%
Once you’ve made sure your finances and credit are in order, it’s time to think about getting pre-approved for a mortgage in order to buy a house in New Jersey. Pre-approval will let you know exactly how much you can borrow and that you most likely can get the financing (if nothing changes) and will show sellers that you’re a serious buyer.
Here’s what is typically involved in getting pre-approved . . .
“[A] lender will look at your credit report to make sure that you have a qualifying credit score and see if you have any major debts or blemishes such as bankruptcy. The lender will also look at how much debt you have relative to your income and ask you for information about your income and assets. It helps to have documentation including recent W-2s, paystubs, bank statements, and any other relevant paperwork ready to go, to make the process as smooth as possible.”
Cash for Down Payment and Closing Costs
And in order to buy a house in New Jersey, you’ll also need to have saved up enough cash to cover the down payment and closing costs.
Formerly, the standard amount for a down payment was 20% of the purchase price, and you still need to put 20% down in order to avoid having to pay for private mortgage insurance (PMI). But today there are other downpayment options that will allow you to pay less than 20%.
For example, “FHA loans require only 3.5% down, and there are conventional-loan options that allow you to go as low as 3% down – with the caveat that mortgage insurance will be included. If you qualify for a VA or USDA loan, you could get a home with 0% down.”
And there are also closing costs to contend with. “When you’re figuring out how much you need to save, don’t forget to factor in closing costs. Your individual closing costs will vary depending on your situation, but usually end up being around 2%-5% of the home’s value.”
All the Necessary Documents
To buy a house in New Jersey, you’ll need to have all the necessary documents ready to hand for your lender and at closing.
The main documents you’ll need to provide your lender (along with authorizing them to access your credit history) include:
- Pay stubs, tax returns, and W-2s (typically for the past two years)
- An employment verification letter
- Bank statements
- Information about all your other assets such as stocks and bonds
- A photo ID
- Your rental history (if applicable)
- A Year-to-Date Profit and Loss Statement (for the self-employed)
In certain circumstances, you may have to provide additional documentation. “If,” for example, “a family member will gift your down payment and closing costs . . . you must provide a gift letter. This provides information about the donor and the amount of their gift. And if you’re using alimony or child support payments for qualifying purposes, you’ll provide copies of the court order.”
A Good New Jersey Agent
The final thing you’ll need – and perhaps the most important – to buy a house in is a good local real estate agent. An experienced agent can guide you through the whole process, ensuring that you do have everything you need in place and helping you avoid any problems along the way. Finding a good agent can often be a time-consing process involving research and interviews. But you can make it much easier by contacting a premier agency with quality agents. If you’re ready to buy a house in New Jersey, then, contact us today at 855-966-DEAL.