| Loan Type | Rate | APR |
|---|---|---|
| 30-year fixed | 6.696% | 6.776% |
| 15-year fixed | 6.002% | 6.14% |
| 7/1 ARM (adjustable rate) | 7% | 7.57% |
| 5/1 ARM (adjustable rate) | 6.705% | 7.459% |
With its proximity to New York City and Philadelphia and its miles of beaches, New Jersey has a lot of appeal. Curious about what to expect when refinancing or buying a home there? Here’s a guide to New Jersey mortgage rates homebuyers experience and what they mean.
The Best Mortgage Lenders in NJ for Rates:
- Best Overall in New Jersey: Quicken Loans®
- Best for Bank Statement Only Loans: Luxury Mortgage
- Best for First Time Home Buyers: loanDepot
- Best for Low Credit Score: PNC
- Best for Digital Mortgages: Guaranteed Rate
- Best for Veterans: Veterans United
What Is a Mortgage Rate?
Almost every loan has interest. After all, financial institutions need to cover the costs of administering the loan while making a profit. Your mortgage rate is the interest on your home loan.
When you get mortgage rate quotes from a lender, you might see 2 interest rates. The 1st is your mortgage rate, which is a small percentage that’s multiplied against your loan balance. The 2nd is your annual percentage rate (APR), which includes application fees, origination fees and other charges that you pay when you get a mortgage. The APR is higher than your mortgage rate due to these costs. Consider both rates when comparing mortgage quotes.
What Factors Impact Your Mortgage Rate?
Each lender has different rates. If you and another person apply with the same lender, the lender might offer each of you different rates. Why is that? Here are a few factors that impact your mortgage rate:
Your Credit History
Lenders don’t have a crystal ball to see which borrowers pay their mortgage payments on time. Instead, they look at your credit history to make an educated guess about what you’ll do in the future. Lenders look at:
- Whether you have a history of making payments on time
- How long you’ve had credit
- How much of your available credit is being used
Your Down Payment
A larger down payment shows lenders that you’re invested in your home. It also lowers the risk to lenders. Let’s say you want to buy a $150,000 home. If you put down a 10% down payment, the lender has to loan you $135,000. If you put down 20%, the lender just has to loan you $120,000 for the same property.
Your Debt and Income
Lenders also look at how much debt you have in comparison to your income. This is called your debt-to-income ratio. Lenders add up your debt payments, including auto loans, credit card payments and your potential mortgage payment. Next, they compare it to your pretax income. Ideally, your debt payments should be 43% or less than your pretax income. Some lenders allow up to 50%.
Inflation
Inflation impacts rates for all borrowers. The price of gasoline has increased, for example, due to inflation. Lenders need to make sure interest rates cover their costs now and in the future since mortgages can last up to 30 years.
The Economy
Changes in the gross domestic product (how much the U.S. produces) and unemployment also impact mortgage rates. When the economy slows down, lenders lower interest rates to encourage consumers to buy homes. When the economy picks up, lenders increase interest rates because there’s more competition for mortgage funds.
Each lender has its own criteria for evaluating borrowers. This is why it’s essential to get more than one purchase or refinance quote to ensure you find the best rate.
What Is a Mortgage Type?
When you start getting mortgage rate quotes, you’ll find a variety of mortgages. Here are the most common types of mortgages:
Conventional Loans
A conventional mortgage is a mortgage that isn’t insured by a government agency. This means lenders take on more of the risk. Conventional mortgages typically have higher credit score requirements. If you make a down payment of less than 20%, you may have to purchase private mortgage insurance (PMI). PMI helps lenders when borrowers default on homes. After borrowers default, lenders sell homes. If the homes don’t sell for enough to cover the mortgage balance, PMI makes up the difference.
FHA Loans
The Federal Housing Agency insures FHA mortgages. These mortgages are designed to help people buy homes. They have a low minimum down payment requirement of 3.5% if you have a credit score of 580 or higher. If your credit score is 500–579, you might still qualify if you make a down payment of 10% or more.
USDA Loans
The U.S. Department of Agriculture insures USDA mortgages. These mortgages help low- to moderate-income borrowers buy homes in rural areas. Some USDA mortgages have no minimum down payment.
VA Loans
The Department of Veterans Affairs backs VA mortgages. VA mortgages help current service members and veterans buy homes. If you qualify, you can get a mortgage with no down payment. The VA also caps closing costs and minimizes fees to keep the process affordable.
Private lenders offer government-backed mortgages. Each lender has to be approved by the appropriate agency. Government-backed loans tend to have more paperwork to complete, but the flexible requirements make them a good fit for many borrowers.
What Is a Mortgage Term?
Your mortgage term is how long it will take to pay off your home loan if you just make the minimum monthly payments. Let’s take a look at a few common mortgage terms:
30-year Fixed
A 30-year fixed-rate mortgage will last for 30 years, assuming you only make the minimum monthly payments. It has the same interest rate — and the same minimum monthly payments — for all 30 years.
15-year Fixed
A 15-year fixed-rate mortgage will last 15 years if you make the minimum monthly payments. The interest rate stays the same, which means your payments remain the same as well. A 15-year fixed-rate mortgage typically has higher monthly payments than a 30-year fixed-rate mortgage, but you pay less in interest over the life of the mortgage.
5/1 ARM
A 5/1 ARM is an adjustable-rate mortgage. Most adjustable-rate mortgages start with an introductory period with a fixed rate. After the introductory period, the interest rate changes on a predetermined schedule. A 5/1 ARM has a 5-year introductory period. After that, the interest changes once per year. The interest rate may go up or down, which means your minimum monthly payment may increase or decrease as well.
When you get a refinance or purchase quote, keep the term in mind. This is especially important when comparing quotes among lenders.
Current Mortgage Rates in New Jersey
Mortgage rates change daily, Monday through Friday. Lenders adjust rates up or down to reflect economic and real estate market changes. We update mortgage rates frequently to reflect the most relevant information. Below are current rates:
| Loan Type | Rate | APR |
|---|---|---|
| 30-year fixed | 6.696% | 6.776% |
| 15-year fixed | 6.002% | 6.14% |
| 7/1 ARM (adjustable rate) | 7% | 7.57% |
| 5/1 ARM (adjustable rate) | 6.705% | 7.459% |
Calculating Interest in NJ
When you make a monthly mortgage payment, it’s divided among:
- Interest
- Your mortgage balance
- Property taxes
- Insurance
Each month, you pay a little bit less in interest and a bit more toward your mortgage balance. This is called amortization. Let’s take a look at how much you pay in interest for an average home in 4 New Jersey cities:
| City | Average Home Value | Loan Term | Current Rate | Downpayment (20%) | Monthly Payment | Total Interest Paid |
|---|---|---|---|---|---|---|
| Newark | $264,100 | 30-year fixed | 6.296% | $52,820 | $1,307.21 | $259,315.60 |
| Jersey City | $486,500 | 30-year fixed | 0% | $97,300 | $0.00 | -$389,200.00 |
| Paterson | $269,200 | 30-year fixed | 6.296% | $53,840 | $1,332.46 | $264,325.60 |
| Elizabeth | $307,400 | 30-year fixed | 6.296% | $61,480 | $1,521.54 | $301,834.40 |
Lender Credit Score Minimums in NJ
Your credit score is a 3-digit number developed by credit scoring companies. Your score gives lenders an idea of your credit history and how risky it is to loan you money. Scores range from 300–850. A score of 700 or more is considered good, and you’ll get lower interest rates than someone with a lower score.
Lenders also establish a minimum credit score. You might need to take steps to boost your credit before applying for a mortgage if you don’t meet the minimum. Here are examples of the minimum credit score required by NJ lenders:
| Lender | Minimum Credit Score Required |
|---|---|
| Bank of America | 620 |
| Caliber Home Loans | 620 |
| guaranteed Rate | 620 |
| Homebridge Financial Services | 620 |
| Quicken Loans® | 620 |
5 Best Mortgage Lenders in New Jersey
Ready to get a mortgage quote? Here are our 5 best mortgage companies in New Jersey:
- Online Service
1. Best Overall: Quicken Loans®
Quicken Loans® combines an intuitive online application with award-winning customer service.
This makes it a great fit for both new and experienced homebuyers.
Quicken Loans® offers conventional, VA, FHA and USDA loans. It also offers a proprietary mortgage that allows you to choose your mortgage term.
- Comparing Lenders
2. Best for First Time Homebuyers: loanDepot
loanDepot is one of the best lenders around for first-time buyers.
With branches throughout New Jersey, loanDepot offers in-person service.
It’s also one of the most active lenders for FHA mortgages, which many first time homebuyers use due to the low down payment requirements.
3. Best for Low Credit Scores: PNC
PNC is open to nontraditional credit histories, which makes it an excellent choice for borrowers with lower credit scores.
It also offers a wide variety of products, including government-backed mortgages and proprietary products.
You can start your application online and get updates through its mortgage tracker.
- Personalized support
4. Best for Digital Mortgages: guaranteed Rate
guaranteed Rate offers a completely digital mortgage experience. It also has an excellent track record when it comes to customer service.
You can complete the entire mortgage process without ever talking to someone. If you want some guidance, though, Guaranteed Rate can provide that, too.
It offers a wide range of products, including government-backed and conventional mortgages.
- Current Service Members
5. Best for Veterans: Veterans United
If you’ve logged some time in the military, Veterans United’s loans will likely be the best deal. Unlike other veteran-marketed loan programs, Veterans United only accepts active duty and veteran military members.
In addition to no-down-payment loans, you’ll also eliminate the private mortgage insurance you’ll have to pay with other mortgages.
Veterans United is also more forgiving of lower credit scores. Interest rates are lower than average.
- Self-employed Borrowers
6. Luxury Mortgage: Best for Self-Employed
Luxury Mortgage makes it easy for all types of home buyers to get approved for a mortgage. Their flexible requirements can help you get financing, with no employment or income verification and no minimum DTI. Luxury Mortgage offers traditional loan terms, as well as more flexible home payment plans with their 40-year loan program.
It’s also easier to get approved if you’re self-employed. Tax returns are not required and you’ll only need one year of self-employment income history and a minimum credit score of 580. Luxury Mortgage can also help you get approved on assets alone, like your bank statements, stocks and bonds, or retirement accounts.
Finding the Best New Jersey Mortgage
The mortgage process can be intimidating. The best approach is to get multiple quotes from different lenders. Comparing allows you to choose a lender who offers you the best service and rate. Even a small interest rate difference can save you thousands, so it’s worth the extra time and effort.
Frequently Asked Questions
How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
How much interest will I pay?
Interest that you will pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first time buyers. Check out the lenders that specialize in making the home buying experience a breeze.
