Mortgage Guide for New Jersey

Mortgage rates are set by lenders and vary daily. This guide focuses on structural factors that affect your loan in New Jersey.

The Highest Property Tax Rate in the Nation

New Jersey’s effective property tax rate of 2.49% is the highest in the United States. On a $525,000 home, that translates to approximately $13,073 per year, or $1,089 per month added to your mortgage payment through escrow. This single line item often exceeds the combined property tax and insurance costs in most other states. When lenders calculate your debt-to-income ratio, the full property tax escrow counts against qualifying income. A borrower earning $120,000 per year would see roughly 11% of gross monthly income consumed by property tax alone, before accounting for the loan payment, insurance, or any other debts. This is the defining structural factor in New Jersey mortgage qualification: borrowers consistently qualify for less house than they would in lower-tax states at equivalent income levels.

Rates vary by municipality and school district, with some northern New Jersey towns carrying effective rates above 3.0% . New Jersey funds its public school system primarily through property taxes, and districts with higher-rated schools tend to have higher millage rates. The state offers some relief through the Homestead Benefit program and the Senior Freeze (Property Tax Reimbursement) program, though these do not reduce the rate used in mortgage qualification calculations.

The Realty Transfer Fee Is Tiered, Not Flat

New Jersey’s Realty Transfer Fee (RTF) is a graduated tax that increases with the sale price. The base rate is $2 per $500 of consideration ($4 per $1,000, or 0.40%) for properties selling below $350,000. For sales between $350,000 and $550,000, the rate increases to $3.90 per $500 . Above $550,000, rates continue to escalate. An additional 1% fee applies to any residential sale exceeding $1 million, functioning as New Jersey’s mansion tax. On a $525,000 home, the total Realty Transfer Fee is approximately $3,700 to $4,200 depending on the applicable tier . For a $1.2 million purchase, the combined RTF and mansion tax would add approximately $17,000 to $19,000 in transfer costs. These fees are typically paid by the seller in New Jersey, though the cost is effectively built into the transaction price. First-time homebuyers purchasing properties under certain price thresholds may qualify for a partial exemption from the RTF . For more on how transfer costs affect your closing statement, see the guide on transfer taxes and recording fees.

High-Cost Counties and Conforming Loan Limits

New Jersey’s position between the New York City and Philadelphia metropolitan areas means that most or all of its 21 counties are designated as high-cost areas by FHFA. Counties in the NYC metropolitan statistical area carry the maximum high-cost conforming limit, while southern New Jersey counties in the Philadelphia-Camden-Wilmington MSA also receive elevated limits. This is significant because the state’s median home price of approximately $525,000 exceeds the baseline conforming limit but falls comfortably within the high-cost limit. Without the elevated limits, a substantial share of New Jersey purchases would require jumbo financing, which typically carries stricter qualification standards and may have higher rates. The FHA loan limit in high-cost NJ counties is also elevated, expanding access to FHA-insured financing for borrowers who prefer lower down payment options.

Two Metro Markets Define the State

Northern New Jersey functions primarily as a New York City commuter market, with Bergen, Hudson, Essex, Passaic, Morris, and Union counties drawing residents who work in Manhattan and the surrounding boroughs. Median home prices in these counties frequently exceed $500,000 to $700,000, with some towns like Hoboken, Montclair, and Short Hills exceeding $1 million . Southern New Jersey, including Camden, Burlington, and Gloucester counties, is oriented toward Philadelphia and tends to have lower price points, with medians in the $275,000 to $375,000 range. Central New Jersey (Middlesex, Somerset, Monmouth) falls in between, with strong commuter access to both metro areas. This regional variation means the mortgage experience differs substantially depending on where in the state you purchase, even though the property tax structure and transfer fee schedule apply uniformly.

NJHMFA Programs for First-Time Buyers

The New Jersey Housing and Mortgage Finance Agency (NJHMFA) administers several programs targeting first-time homebuyers. The agency’s First-Time Homebuyer Mortgage Program offers competitive fixed-rate financing with down payment assistance options. NJHMFA’s down payment assistance program provides up to $15,000 as a forgivable second mortgage for eligible buyers . Income limits, purchase price caps, and credit score requirements vary by county and household size. Most NJHMFA programs define first-time buyers as anyone who has not owned a home in the prior three years. The agency also works with participating lenders statewide, so borrowers do not apply directly to NJHMFA but rather through approved mortgage companies.

Insurance Costs Are Low Relative to the Region

New Jersey’s homeowners insurance rate of approximately 0.25% of home value is modest relative to the state’s overall cost of homeownership. On a $525,000 home, that translates to roughly $1,313 per year, or $109 per month. However, New Jersey’s extensive coastline along the Atlantic Ocean and its low-lying coastal areas create significant flood risk for a portion of the housing stock. Properties in FEMA-designated Special Flood Hazard Areas, particularly along the Jersey Shore from Sandy Hook to Cape May, require separate flood insurance. In the aftermath of Superstorm Sandy in 2012, many coastal communities saw flood insurance premiums increase substantially as FEMA updated flood maps and phased out grandfathered rates. Buyers considering coastal properties should budget for flood insurance premiums of $1,000 to $5,000 or more annually depending on flood zone, elevation, and coverage level.

What This Means for Your Monthly Payment

On a $525,000 New Jersey home with 10% down ($472,500 loan) at a 6.5% interest rate, estimated monthly costs break down as follows: principal and interest of approximately $2,987, property tax escrow of approximately $1,089, homeowners insurance of approximately $109, and PMI of approximately $197 (assuming 0.5% PMI rate). The total estimated monthly payment is approximately $4,382. Property taxes represent nearly 25% of the total monthly obligation, a proportion that is substantially higher than the national average. At this payment level, a borrower would need a household income of roughly $135,000 to stay within a 39% DTI ratio before accounting for any other debts. In northern New Jersey municipalities with effective tax rates above 2.5%, the monthly property tax escrow alone could exceed $1,200 on the same home. PMI rates vary by credit score, loan-to-value ratio, and insurer, so your actual cost may differ from this estimate.