First Time Buyer

Congratulations! You’ve finally reached the point where buying your first home is a reality instead of a long-off dream. After years of paying rent or living with family or friends, you’re ready to move into the exciting world of home ownership. Before you start planning for your move, however, it’s important to fully understand the home buying process.

You probably have a pretty good idea of your savings and of how much of your budget you can (or are willing to) use towards your housing expenses. Great.

Nevertheless, there are many factors that determine just how much you can actually afford to spend on a home. The best way to assess your home-buying power, is to get pre-approved for a mortgage. We recommend that you speak to a qualified mortgage specialist. He or she will “run the numbers,” check your credit, and give you a pre-approval letter that states the maximum price you can afford for the home. The pre-approval letter will also open certain doors when you start seeing properties with your realtor. There are properties in Hoboken that will only be shown to pre-approved buyers, as sellers have gotten more cautios about the seriousness of buyers and have adjusted their screening processes.

We’ll gladly recommend to you a mortgage specialist if you’re not already working with one.

The amount you can pay up-front, known as the down payment, plays a very important role in your home purchase. Not only does it determine how much money you’ll need to borrow, but also how likely it is for you to be approved the mortgage loan. The days or zero percent financing are over, and nowadays you typically need at least 5% down, usually more. Make sure you have a decent down payment, even if you need to beg, borrow, or…you get the picture. Ten percent down is good, twenty percent down is even better, as at this amount you can avoid paying mortgage insurance. For more on mortgages, see mortgage information.

With Hoboken’s high rental prices, it’s really not that much more to own the home.
Consider this:

One-bedroom rentals in Hoboken typically range in price from $1,800 to $2,500, two-bedrooms can run anywhere from $2,000 to $3,500. For example, in a high-rise, waterfront building you’ll pay $2,500 for a one-bedroom apartment…that’s $30,000 a year! Does it make sense to throw your hard-earned money away, or shouldn’t your money be working for you?

On average, you can afford 30% more than what you’re paying for rent due to the tax deductions you get as a homeowner. Using a monthly rent of $2,500 as an example, mortgage payments of $3,200 per month would work out to be the same as renting—after your tax deductions— except you’d actually own the home and would be building equity. In fact, after a couple of years you’d actually be paying less than if you were renting, as rent tends to go up while your mortgage payments usually don’t. $3,200 per month allows you to afford a nice $500,000 condo (possibly more!), including taxes, insurance, and maintenance fees.* That’s equivalent to a nice two-bedroom condo in a desirable location.

* Based on a 20% down payment, current mortgage rates, average taxes and other fees.

Use this Rent vs. Buy Calculator to run the numbers and see for yourself.

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