Can You Afford to Buy NJ Real Estate?

Be certain to determine all involved costs

When determining whether you are qualified to purchase NJ Real Estate, it is important to understand all the costs involved in buying and owning a home. Many times buyers overlook expenses such as homeowners insurance, down payments, property depreciation, closing costs, moving, furnishings and required home maintenance when they move in.

Once you are a homeowner, you are responsible for every problem that may arise inside as well as outside the home, such as window or roof replacement in older homes. Most people can afford a home that costs up to three times their annual household income, if they can make a 20% down payment and have only a moderate amount of other debt. If you have little to no debt and can put 20% down, you can probably buy a house worth up to four times your annual income.

The following list should be followed in order to determine whether home ownership is possible:

  1. Establish the property value of homes that interest you by evaluating the prices of recent home sales in comparable areas. A NJ Real Estate RE/MAX agent is able to provide this helpful information for you.
  2. Assess various mortgage loans and compare their required down payment amounts to your affordability. Down payments are based on property value percentages and determined by the type of mortgage chosen and usually vary from 3% to 20% of the property value. Remember to also include private mortgage insurance, a policy which entitles the lender to recover a portion of their financial loss due to borrower default.
  3. Obtain an estimate of your closing costs from your lender once you have applied for a mortgage. Incurred costs include property taxes, prepaid loan interest, title insurance, inspections and financing expenses from your NJ Real Estate agent or lender.
  4. Add the total down payment and closing costs to determine the required amount needed for the NJ Real Estate transaction.
  5. Factor in how much homeowners insurance will cost you. This amount is based on age and construction of the NJ Real Estate property, personal insurance protections, your credit and any past insurance history as well as liability insurance involving accidents that can possibly occur in the home.
  6. Determine a budget for any maintenance and repairs that might be required for the home.
  7. Determine the cost of your NJ Real Estate property taxes. The property listing usually mentions the previous year's property taxes. If you do not find them there, ask the seller for a tax receipt or contact the local assessor's office. Tax rates can change from year to year and can change based on the value of the home, so these figures may only approximate your future property tax liability. The local assessor can give you more detailed information on figuring your property tax costs.
  8. Decide whether or not you wish to hire a moving company to assist or rent a moving truck and do it yourself. Both are expenses that should not be overlooked.