Buying a home in Hoboken or Downtown Jersey City is a major investment, and the process can feel daunting – but it doesn’t have to be!  This guide is meant to help demystify the process and give you some practical tips and tricks to make your next purchase headache free!

Is Buying Right for You?

Tired of paying someone else’s mortgage? We’ve all been there!  But before you pull the trigger on buying your next place, it’s important to understand the pros and cons of buying vs. renting:

Weighed the pros and cons and think buying might be right for you? Great! Follow these steps to make finding your dream home as pain-free as possible!

Check Your Credit

Make sure your credit is in tip-top shape. The credit bureaus are required to give you one free report per year, or you can always try free services like Credit Karma.   For the best rates, you’ll want a score of 740+. It may still be possible to buy with scores as low as 620, but a lower score will affect your interest rate and ultimately your monthly payments.  Dispute any inaccuracies and aim to reduce your credit card utilization rate to boost your score. To get a very rough estimate of the rates and terms you may qualify for, tryout Zillow’s Mortgage Rate Shopping Tool

Determine your Budget

Now that you know where your credit stands and have a rough estimate of the rate and terms you might qualify for, you’ll need to determine how much you have available for a down payment and what monthly payment you can afford – from there, you can work backward to determine your budget.  While having at least 20% down will save you mortgage insurance and signal to the seller that you’re likely a strong buyer, it is possible to get by with a downpayment as low as 3.5% for FHA loans, or even 0% down for qualified Veterans through a VA loan (bonus – VA loans are typically below market rates and there’s no PMI, but if you’re buying a condo, both VA and FHA loans take some extra work to get the building approved for financing). We’ve personally navigated the VA loan process and successfully purchased a Hoboken condo using a VA loan.  The FHA loan process is similar, so we know the ropes and can help you! A good place to start is with your current housing cost – is it comfortable? Do you think you can afford more? If so, a good plan of action is to simulate your projected housing payment by putting the difference between your current rent and your anticipated payment into a savings account each month. By doing so, you’ll get a sense of whether or not the payment is sustainable, and you’ll build up additional savings to help you with the transaction costs when you buy. In general, lenders like to see a housing payment that is not more than 28% of your gross income, and a combined housing payment + other monthly debt of no more than 36% of your gross income.  You can go higher, but financing becomes more difficult to obtain, and often more expensive if your back-end DTI exceeds 43%.

Figured out what you can comfortably put down and afford as a monthly payment? Great, now you’ll want to determine what that translates to in terms of a purchase price.  There’s more than just principal and interest, so you’ll want to plan on including property taxes, monthly maintenance fees (if you’re buying a condo), individual maintenance of your unit, and insurance.  These numbers will vary by individual property, but as a general rule of thumb in Hoboken I’d recommend estimating:

1.25% of the purchase price for annual taxes

0.6% of the purchase price for monthly common maintenance charges, building insurance, and basic property management/maintenance for a unit w/o parking

$3000/year for parking (if needed)

0.2% of the purchase price for individual unit maintenance annually

0.15% of the purchase price for individual unit insurance

So for the typical $800K condo w/a separate expense for parking

$10,000 in property tax

$4,800 in common maintenance fees

$3,000 in parking

$1,600 in individual unit maintenance

$1,200 in insurance for your individual condo unit/household items

Total = $20,600/yr or $1,717/mo. plus Principal and Interest (P&I)

In Hoboken on an $800k purchase, assuming a down payment of 20% ($160K), financing at 4.25% over 30 years, you’re looking at roughly $3,148 P&I + $1,717 for a total of $4,865/mo.

For Downtown JC, substitute 1.62% for the tax rate and keep everything else the same, which yields: $23,560/yr or $1963/mo. Plus P&I.

In Jersey City, on an $800k purchase, assuming a down payment of 20% ($160K), financing at 4.25% over 30 years, you’re looking at roughly $3,148 P&I + $1,963 for a total of $5,111/mo.

Now that you’ve got a sense of what you can afford, it’s time to:

Hire a Great Realtor

(Note: depending on your level of comfort sharing the details of your credit and finances with your agent, you may want to do this first)

Hiring a great Realtor is key to making your purchase as stress-free as possible.  In most cases, there’s simply no good reason to go it “alone”. You’re unlikely to gain any concessions by not using an agent as in most cases the Seller’s agent simply becomes a disclosed dual agent and takes the entire commission.  You’ll want someone on your side! And – shameless plug here –  when you hire me, I rebate 50% of my commission, so on the average $800K purchase, I’ll give you a $10,000 credit at closing!   Interview a few Realtors and find one who is knowledgeable and understands your unique circumstances.  A couple of pointers – look for a Realtor who:

• • Can help you impartially weigh the pros/cons of buying vs. renting
  • Understands and respects your needs, wants, and budget
  • Is upfront with you about how your budget compares to your needs/wants
  • Understands the various financing programs and associated requirements and pros/cons (Conventional, FHA, VA, Portfolio Loans, 203k)
  • Understands and can recommend professionals to help you with financing, inspection, attorney review, and renovations (when needed)
  • Lives in the area and knows it well.  Ask about things like flood zones, transit options, parking, local parks, restaurants, bars, gyms, and other amenities.
  • Is aware of planned new construction / and if applicable the impact on City views.
  • Has a detailed understanding of the marketplace and can help you analyze the comps and market trends to negotiate the best possible deal
  • Will send you new listings that are relevant to your search
  • Works around your schedule to set showings
  • Is not pushy and does not guilt you into making an offer
  • Bonus – Offers a rebate at closing to help with closing costs!

Found the right Realtor? Awesome! Now it’s time to

Get Pre-approved for Financing

Before you make an offer, you’re going to want to have a pre-approval that shows that you’re a qualified buyer and confirms the rates and terms for which you are qualified.  Your Realtor should be knowledgeable about financing options be able to recommend mortgage lenders who have experience in the local area. This is where the paperwork starts to add up – you’ll need your last 2 years of W2’s, tax returns, employment and salary information, job and address history, as well as statements for all of your accounts (checking, savings, cd, retirement etc).  There’s a lot of documentation required; however, getting pre-approved will help you solidify your budget and it puts you in a position to make an offer when you find the right property.

Once you’re Pre-approved for financing, it’s time to start your search in earnest

The Search

Your realtor should match your needs, wants, and budget against the  current inventory to schedule initial showings. A good Realtor will have the comps at hand and be able to tell you how the asking price compares to recent sales and other active listings.  If the right property is not on the market at the beginning of your search, your Realtor should regularly analyze and send you new listings that match your needs, wants, and budget to see if you’d like to schedule a showing.  Buying a home is a major investment, don’t tolerate pushy agents who guilt you in to buying a property just because you’ve looked at a lot of listings. I’m committed to being a no pressure Agent – whether it takes 1 showing or 100 showings to help you find the right place, you’ll get the same attention to detail, analysis, and advice, without any pressure to pull the trigger.  My goal is to help you find your dream home and buy it at the best possible price – sometimes it takes a while!

In addition to analyzing and sending you new listings, your Agent should stay on top of price reductions – you never know when a property that was priced too far above your budget to consider will have a major price reduction and suddenly be in striking distance!

If you’ve found the right place but think you might want to do some renovations, it’s a good idea to schedule another showing and bring your contractor in (your Realtor should be able to recommend a few) to confirm the scope of work and budget.

Found the right place?!  It’s time to

Negotiate a Deal

A good Realtor will perform a detailed comparative market analysis, which takes taxes and maintenance fees into consideration to help you formulate an offer strategy that is tailored to the unique set of circumstances surrounding the home.  Ultimately, your offer is your decision – but a good Realtor can advise you on strategies for negotiating on/with:

• • New listings
  • Multiple offers
  • Recent price reductions
  • Stale listings
  • Signs of Buyer’s leverage (vacancy and other indications that the seller “needs” to sell fast)
  • The psychology and signaling associated with your offer
  • Counter-offers and inclusions/exclusions

Struck a deal? It’s time for:

Attorney Review

One of the commonly misunderstood phases of buying and selling a home is the attorney review period.  In fact, before becoming a Realtor, when we sold our Condo, we used a local Realtor with decades of experience who seemed knowledgeable, and even she didn’t fully understand the ins and outs of Attorney Review.  In New Jersey, by statue, both the Buyer and Seller can hire an attorney to review the contract. Each party has 3 days for their lawyer to conduct an initial review and (usually this happens) disapprove of the contract in its current form. During this period, it’s not uncommon for a higher offer to come in, and the seller may have their Attorney cancel the contract to accept a higher offer.  Contrary to popular belief, Attorney Review does not have to last 3 business days.  Attorney Review ends if an Attorney does not disapprove of the contract within 3 business days, or when both parties Attorneys accept the contract as-is or with riders to the contract.  So if both Attorneys approve of the contract and (usually) riders, the Attorney Review period concludes and there is an enforceable contract in place. I’ve met great Attorneys and abysmal attorneys who are unresponsive and jeopardize the transaction.  Interview a couple of Attorneys and find one who you’re comfortable with. I strongly recommend hiring a local Attorney who has experience in Hoboken and Jersey City. Your Realtor should be able to recommend a number of Attorneys to represent your interests.

Once you’ve satisfied Attorney Review, you’re under contract!  Now it’s time for the

Inspection

The inspection can be a scary and confusing process – the report often contains pages of legal disclaimers to protect the inspector from lawsuits – they’ll make your head spin! Once you get past the boiler-plate disclaimers, inspector lingo can make even the smallest problem sound like a major issue (A reversed polarity Hot / Neutral wiring problem AHHHH! – relax, this one is easy to fix!).  In most cases your Realtor should be able to help you make sense of the report and negotiate repairs and/or credits to account for these issues. Understanding what is and what is not a ‘big deal” is critical to getting through the inspection with your deal intact.

Financing

Since you’re already pre-approved, you’ve likely submitted most of the documents you’ll need regarding your income, assets, and liabilities. Your lender may ask for updated statements and will pull your credit again, but barring any unexpected changes this aspect should go relatively smoothly.  At this point, you’ll want to either lock-in your rate or decide to “float” the rate and lock it in before closing if you anticipate rates going down. Now that you’ve found your next home, the lender will need information about it – you’re likely to need the master deed, HOA’s articles of incorporation, HOA meeting minutes, the HOA’s current financial statements and balances as well as survey information.  If you’re using a FHA or VA loan on a condo that is not already on the approved list, you’ll also need to submit it for approval. This process adds time – but there are ways to expedite the review/approval – make sure your Realtor has experience navigating the process! During this time period, you’ll also want to shop for homeowners and title insurance. Your lender will often have a preferred title insurance company, but it’s smart to compare rates!  Once your lender has submitted your full loan application, underwriting will review and identify any additional documentation/actions necessary for approval. Once you’ve satisfied these requirements, your application moves to final underwriting and upon approval, you should receive a commitment letter. At this point, you’re pretty much locked in! A day or two before closing, you should receive a statement disclosing all fees and adjustments for things like inspection, prepaid property taxes, etc.  Tip- if you’ve hired me as your Buyer’s Agent, this is where you’ll see your rebate credited! Use it towards closing costs or take a check for the rebate at closing!  This statement will be sent to your lender for review and upon approval, you should be “cleared to close” and receive closing instructions.  

You’re getting close, but there’s still a few more steps!

Final Walk-through

On the day of or day before closing, you’ll walk-through your new home one more time prior to closing.  The seller should have moved out and left the home “broom clean.” Make sure that there’s no new damage, this is your last chance to address any issues!  If you find anything awry, you’ll want to notify your Attorney right away so that you can negotiate a final credit or have money held in escrow to ensure the repair occurs after closing.  After the final-walkthrough, there’s only one thing left before you get the keys!

Closing

Get ready for a serious case of writer’s cramp!  You’ll sign countless documents and it will feel like the stack of paperwork isn’t getting shorter – but hang in there, once everything is signed, you’ve officially purchased your new home – Congratulations!