Closing costs are all the costs associated with transferring or resolving a mortgage and closing a house. The fees account for credit checks and title searches on the new owners, appraisals of the property, and any other costs associated with the transfer.
These costs are different depending on the state the transfer is taking place in, but they usually equal 2 to 5 percent of the total amount borrowed (this is called the loan principal). When you refinance a mortgage or apply for a home equity credit or loan, you have to pay these costs again.
As a New Jersey homeowner, buyer, or agent, you need to know the particulars of closing costs in New Jersey, including how much they usually amount to, who pays them, and what you can do to change them. Some of the costs associated with closing are dependent on the buyer or seller’s status, so some of these items are negotiable. It pays to know which ones you can potentially control and save money on your deal.
Continue reading this guide for everything you need to know about typical closing costs in NJ.
Average closing costs in NJ
Many factors influence the real amount that closing costs will set you back when you’re buying or selling a house in New Jersey. In general, the average you can expect to pay is usually between 2% and 3% of the total purchase price.
Importantly, these costs are not considered fees. As such, they are not paid as a result of a transfer of title but in advance of closing a loan on a house in order to make the transfer. This makes a difference in terms of when and how you will pay these costs.
The amount can vary depending on the property taxes associated with the purchase, the homeowner’s insurance, and mortgage interest. It can also be agreed upon in advance by contract how much the buyer and seller will contribute to the closing costs. In general, they both have fees that they are responsible for.
Since “closing costs” is a blanket term, it includes third-party fees as well. Anything paid to close a house is included, including fees for the government to record the deeds, surveys, and appraisals, any attorneys that get involved, title searches, or any mortgage resolutions.
Since there are so many variables to consider, knowing the exact amount that will be paid in closing costs in difficult. This information should give you an idea, however.
Who pays closing costs in NJ?
To understand your responsibilities when you’re closing a deal, refer to this breakdown of who pays what in terms of closing costs.
New Jersey Seller closing costs
There are quite a few closing costs that will be the seller’s responsibility, including:
- The real estate agent’s commission
- Title insurance
- Certain property taxes
- Credits towards closing
- Seller attorney fees
- Transfer taxes
As a seller, you have to be prepared for these expenses and make them a part of your closing plans.
New Jersey Buyer closing costs
Usually, closing costs are transferred to the buyer as part of the transaction and added to the price of the total transfer. However, New Jersey home buyers will sometimes try to get the seller to contribute to the closing costs in order to seal a profitable deal. Mortgage lenders may work with you to make this happen. It doesn’t hurt to ask.
Different mortgage loans also change how much the seller is legally allowed to contribute towards the buyer’s closing costs. Check with your local mortgage lender to find out this percentage. On the low end in general, mortgage programs restrict a seller’s contributions to 3%. You may be able to get as much as double that, however. You just need to do your research and find out.
In general, however, a buyer will be responsible for certain closing costs, including:
- Title insurance (for the lender)
- Home inspection costs
- Credit reports
- Recording Fees
- Mansion tax
- Settlement fees
Before closing a deal, you should be aware of which costs will be your responsibility.
How can I reduce closing costs?
Other than the seller’s contribution to your closing costs, there are other ways that you can lower them.
Applying for credit with a lender could give you money to put towards the costs. For example, you could make an agreement with the seller for them to take on some of the closing costs in exchange for repayment later at a higher interest rate.
If a seller is interested in collecting the interest, they might significantly dock your closing costs in exchange for agreeing to these payments.
Remember that closing costs should be estimated and planned for in advance of the deed transfer. A loan estimate should be given to you that will tell you in certain terms what you will be responsible for paying on closing day, followed by a closing disclosure that finalizes it.
You are ultimately responsible for this amount on closing day, so any reductions or exemptions you plan on using to reduce it, either by having the seller take responsibility for a portion of the payments or by bringing in a third-party lender, have to be decided by that time.
Contact a lender or mortgage banker in New Jersey to figure out your options and see what you need to finalize to learn the amount you need to pay in closing costs and to get it as low as you can.
As a buyer or seller of a property in New Jersey, you have to be prepared for closing costs. This includes knowing what they are, how much they will be, and who will be responsible for paying them. In addition to resolving mortgages, closing costs also cover licenses, signing fees, attorneys, and agent commissions, as well as anything that has to be resolved in order to complete the sale.
As a result, closing costs can be extensive, sometimes as much as 6% of the property’s value. This number can be reduced, however, by negotiating with the seller for a loan or talking to a mortgage banker.
If you plan on buying a property in New Jersey but aren’t sure if you’ll be able to cover all the closing costs, speak with your agent, attorney, or banker to see what your options are. Use this guide to determine what qualifies as a closing cost in new Jersey, what you can be expected to pay, and who might share the burden with you with a little negotiation.