Buying a Condo in New Jersey
New Jersey has one of the country’s most expensive real estate markets, making it difficult to afford a house. One of the best ways to purchase a starter home in the state is to buy a condo. Here’s what you need to know about buying a condo in NJ.
New Jersey has always benefitted from its convenient location. Situated between New York City and Philadelphia and having its own coastline, New Jersey has a lot to offer in terms of location. The benefits of cheaper housing and more breathing space have always been attractive features of the Garden State.
For many people, buying a condominium is a logical choice since it requires less maintenance and is often cheaper than buying a detached house. Here are some important steps to follow to make your NJ condo purchase hassle-free.
How to Buy a Condo in NJ
- Decide Where to Buy
- Understand the Monthly Fees You’ll Pay
- Get Pre-Approved For a Loan
- Hire an Agent Who Specializes in the Condo Market
- Determine Your Terms and Make an Offer
1. Decide Where to Buy
The first step to buying a condo in NJ is deciding where you want to buy. Remember that purchasing a property is like entering into a marriage- you’re making a long-term financial commitment! Look at factors such as your commute- how far are you willing to drive to work every day? Even if you’re truly in love with a home, if you’re commuting an hour to work every day, is that something you’re willing to do? Of course, if you work in NYC, there are plenty of great NJ towns near NJ (link this to the NJ towns near NYC article), so you’ll have a lot of options. Another crucial aspect of home buying in New Jersey is property taxes which vary by municipality. Therefore, your yearly taxes could vary greatly depending on where you buy.
2. Understand The Monthly Fees You Will Have to Pay
Each condo association has monthly fees, which may vary. Depending on the community you live in, fees can vary from $100 to more than $1,000 a month. Before you purchase a condo, be sure you factor association fees (which can sometimes be costly) into your budget.
Homeowners Association (HOA) fees can be annoying, but they also pay for what makes living in a condominium so convenient. These fees help maintain the properties and other amenities, such as swimming pools and gyms. Essentially, you pay the fees, and the management company worries about maintenance and repairs.
3. Get Pre-Approved for a Loan
Now, if you are going to pay cash, go ahead, and skip this section. However, for many first-time home buyers, the process of securing financing can be daunting. Real estate in New Jersey is a seller’s market right now, and prices for homes have risen. A key step to purchasing a home is getting a pre-approved loan. Working with a reputable lender will help you figure out what kinds of loans your qualify for. There are many types of loans depending on what you qualify for, which we will discuss below.
Guidelines for Getting a Loan
Those looking to purchase a condo may apply for conventional loans, FHA loans, VA loans, and even USDA loans, given there are condos available in those markets. However, there are stricter guidelines to secure financing for a condo than compared to buying a detached house.
These stricter guidelines require more information provided to the lender and slightly higher interest rates. Since restrictions and assessments are set by the condo’s HOA, this creates risks for the lender, resulting in higher interest rates.
4. Hire an Agent Who Specializes in the Condo Market
Finding the right home can be difficult; make sure you find an agent who knows the condo market well so you can find the best deal. One of the benefits of working with an agent is you have someone in your corner who can walk you through each step of the buying process. Real estate agents use “comps,” otherwise known as comparable sales, to help negotiate the price of a home. Agents look at the prices of recently sold homes in the area and compare them to the asking price of the seller. Knowing the prices of homes that have recently sold in your prospective area can help you justify your offer.
5. Determine Your Terms and Make an Offer
This is another step in the condo-buying process where having a realtor comes in handy.
Your agent will help negotiate the terms and conditions of the sale and can arrange unit inspections. Once an offer is made, your realtor will help you navigate through all necessary contracts. Hiring an additional real estate attorney can provide additional help will the complicated contract process.
Buying an NJ Condo Tips
Now that we’ve covered how to buy a condo, there are a few tricks you should know to help tip the deal in your favor. Knowing these tips beforehand can help you secure your preferred home and protect your biggest asset. Here’s what you should know before you buy a condo in NJ.
1. Include an Earnest Money Offer
In New Jersey, a 30-day window is given to make a mortgage commitment with additional deposits being required. Among those additional deposits may include an “earnest money” deposit which shows the seller you are serious about buying the property.
While an earnest money offer isn’t legally required, this can help secure the purchase in your favor when multiple offers are on the table. Typically, you’ll pay between $1,000 to $2,000 for the initial earnest money deposit when you make the offer and then up to 10% of the purchase price once the offer is accepted.
2. Do Your Research Before Securing Financing
The type of condo association you’re purchasing in can affect your financing qualifications. Buying in well-maintained, mostly owner-occupant associations will increase your chances of getting a loan.
When securing other types of loans, such as FHA, there may be entirely different requirements compared to conventional loans or VA loans. Carefully researching what each loan requires will save you a lot of headaches down the road.
3. Make Sure You Understand Your Insurance Policy
Familiarizing yourself with your condo association’s insurance and deductible policy is crucial. Knowing what the association’s policy covers helps you determine what you need to protect your asset.
As required by law, condo associations insure homes against fire and personal injury in public areas- but that’s just the bare minimum. Having the right insurance policy will help you protect your home in case anything unforeseen should happen.
4. Research the Management Company
Most condominium associations hire outside companies to maintain the properties and enforce rules and regulations. The company that manages the property is who residents will almost always interact with to solve problems. If the company managing the association has a reputation for being unresponsive, it’s important to know this beforehand, as it can lead to problems. It’s always best to buy a condo in a building that is well-managed.
Buying a Condo in NJ: Bottom Line
Buying a condo in NJ is a great option for many people. Condos offer less maintenance, lower price tags, and fewer hassles than owning a detached house. Living in NJ also has its perks, as the state has plenty to offer. For example, if you work in NYC and live in NJ, you’ll save on taxes.
However, there are many things to consider before you buy a condo in NJ. To make sure your purchase is as headache free as possible, you’ll need to choose the right location, find an experienced agent, and do the proper research and secure financing for your condo purchase.