How Much Will Your Mortgage Be in New Jersey?
Homeowners in the Garden State spend nearly one-quarter of their monthly income paying their mortgage thanks to its proximity to the ocean and bustling New York City, among other benefits.
The median home value in New Jersey increased by just over 6% in 2018, meaning the sooner you decide to purchase a home, the better, since the coming years will likely see a similar rise.
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Factors That Can Affect Your New Jersey Mortgage Calculations
The two most important factors to keep in mind when it comes to purchasing a home in New Jersey are the state property taxes and insurance.
Property Tax & Insurance
The effective tax rate in the state is around 2.4% whereas nationally, the tax rate is just a shade over 1%. The tax burden on homeowners can appear to be onerous, but this is due largely to just how valuable homes in New Jersey and New England in general are. The typical yearly property tax paid in New Jersey is roughly $7,840.
It should be noted that property taxes are not actually paid to local governments since each municipality sets its own tax rates. The value of your New Jersey home is valued by a local assessor, then the state’s Division of Taxation adds an equalization ratio to make sure the valuation is fair.
In addition, school districts will also levy taxes.
Tax relief programs do exist to help offset the comparatively high taxes, including senior citizen deductions, disabled persons deductions, and several others. For those with an income under a certain determined amount, the homestead benefit program can also help. Those interested can take a look at all the related programs on the Division of Taxation website linked to above.
New Jersey Closing Costs
Your origination fees (including potential origination points, commitment fees, and document preparation fees), mortgage broker fee, and processing and underwriting are all part of your closing costs. Each mortgage lender will charge their own fees. Should you purchase a home via a VA loan, you will need to pay funding and VA appraisal fee.
The New Jersey Housing Market
New Jersey has nearly 9 million residents, making it one of the states with the highest population density, with most people living in the northeastern counties of Bergen, Hudson, Passaic, and Essex. Camden is also densely populated, as it borders the city of Philadelphia.
As of September 2019, the median home value in New Jersey stands at $329,000, which is 2.5% higher than it was in 2018. In more sought-after areas, however, prices can rise as high as $600,000 or more, such as Paramus or Hoboken. In general, houses stay on the market in New Jersey for about 200 days.
Nearly 56% of homes are decreasing in value as of 2019.
New Jersey Job Stats to Consider
As of 2019, the state is home to almost two-dozen companies on the Fortune 500 list, including Prudential, Johnson & Johnson, Bed Bath & Beyond, and Merck. Bio/pharmaceutical companies are quite prevalent in New Jersey, as are the transportation and logistics, finance, hospitality and healthcare industries.
The unemployment rate in New Jersey was 3.1% in September of 2019, just under the national average of around 3.5%.
Job Stats (Civilian Labor Force, Employment, Unemployment)
Other New Jersey Costs That Can Affect New Jersey Mortgage Calculations
PMI in New Jersey
As in other states, you will have to pay mortgage insurance should you be unable to put down at least 20% on your new home. There are some steps you can take to avoid paying PMI, however. One measure you may be able to utilize is a “piggy-back” or 80/10/10 mortgage whereby you take out two separate loans—one for 80%, the other for 10% of the price of the home—while you put down the remaining 10%.
Another means is with a lender-paid mortgage, which eliminates PMI by letting the lender cover a one-time, up-front PMI fee through a higher interest rate over the life of the loan.
A seller concession can also prevent having to pay PMI in which a determined dollar amount or percentage of the price of the home is paid to you by the seller towards the closing costs, including your PMI. These seller concessions are then financed over the term of the loan with the home’s purchase price.
Homeowner Insurance in New Jersey
The amount of homeowner insurance you will pay depends on whether you purchase a home near the coast, in which case you will need to purchase flood insurance as well, which is covered by the National Flood Insurance Program.
Anyone who is unable to purchase insurance through a private company can apply for coverage with the New Jersey Insurance Underwriting Association (NJIUA) for basic coverage.
New Jersey Home Inspections
A home inspection is an added cost you should expect to pay, and you will have to specifically request for a termite, mold, or other additional inspection. The responsibility lies with the home buyer to pay for any subsequent inspections desired. Another point to keep in mind is that the state’s Department of Environmental Protection suggests that all homes be tested for concentrations of radon.
State Income Tax
New Jersey does post some of the highest state income tax in the nation, clocking in at 6.63% for the whole state, although more than 30 “urban enterprise zones” only charge 3.31%. Property taxes are also quite high, but at the same time, residents of New Jersey don’t pay as much as other states for their gasoline, as their gas taxes are some of the lowest in the country.
You will be required to pay for a credit report (typically about $30), a survey, and title insurance, which protects you from any outstanding liens, misfiled deeds or other problems having to do with former owners. One fee you won’t be charged in New Jersey, however, is a mortgage tax.
You may also be responsible for paying part of the realty transfer tax which are calculated in increments of $500 based on the price of your home. Certain exemptions exist to bring down this fee for seniors and other groups.