How Much are Closing Costs in NJ? What You Should Expect to Pay

Homebuyers often save and save for their home’s down payment, only to realize when they talk to their Realtor that they’ve forgotten an essential part of the home buying process: closing costs.

Planning for closing costs is essential for having a smooth closing process. Closing costs include things like escrow, transfer taxes, the inspection, and more. It’s important to estimate high for closing costs, because they typically have to be paid upfront. Unlike the down payment, they can’t be rolled into your home loan.

If you’re wondering what to expect from closing costs in NJ, here’s what you need to know.

What are closing costs?

Closing costs are the fees and expenses you’re expected to pay when you close on a home. This is separate from the down payment, which is an upfront, partial payment on your house that helps reduce your monthly mortgage payment. 

Closing costs are typically paid to third party entities, and not the home seller/buyer. For example - when you pay for a home inspection, that’s a service fee you pay to a third party. Even if the inspection turns up a major issue and you end up backing out of the sale, you won’t get your money back. 

New Jersey-based Realtor Trish Gesswein explains that the amount of the different charges is usually what surprises home sellers and home buyers the most when it comes to closing costs.

"A lot of them are surprised with the loan and title charges. The differences between the states can also be confusing. A lot of the time in PA, for example, they’ll pay their taxes for the rest of their year - so the way things are done here is sometimes a surprise," she says.

Who pays for closing costs in NJ?

Both the buyer and the seller pay for closing costs in New Jersey; they are responsible for different fees.

How much are closing costs in NJ?

For home buyers, closing costs in New Jersey are roughly 2-5% of the home’s purchase price. The exact number can go up or down depending on many factors - such as whether you have to pay for an HOA or PMI, as well as factors like your home’s size (which can impact the cost of the inspection, etc). 

• The median home in NJ now lists for $450,000 (Redfin) - so closing costs could be estimated to range from $8,980 to $22,450.
• According to ClosingCorp’s data, the average closing cost for buyers in New Jersey is $7,827.87 after taxes or approximately 1.57% to 1.96%.

Homebuyers located in popular, more expensive areas like Englewood Cliffs and Asbury Park will likely have closing costs that are higher than the state average.

To give you an idea of your high-end estimate for closing costs:

• 5% on a $350,000 home in NJ: $17,500
• 5% on a $450,000 home in NJ: $22,500
• 5% on a $550,000 home in NJ: $27,500

If you're wondering exactly how closing costs are calculated: the final amount for closing costs is ultimately dependent on a wide range of variables, such as the cost of the home. Additionally, every transaction is different. Some buyers may be paying all cash, while others are opting for a loan, and these decisions can impact closing costs as well. 

Even the time of year can impact your closing costs - if you buy a home earlier in the year, you’ll need to reimburse the seller for their prorated annual property taxes upfront.

“A cash buyer is going to pay significantly less most of the time; a cash buyer will still have title insurance, but they’ll avoid any lender fees and costs to escrow, etc.,” explains Wagner.

A mortgage advisor is your best resource for getting a more exact closing cost estimate, one that's based on your unique situation. Your Realtor can also be helpful since they have access to the MLS, which provides a calculator that can estimate approximate closing costs for specific properties. Get in contact with one of our NJ Realtors to find out more.

Typical buyer closing costs

• Home inspection ($300-$500)
• Radon inspection (Optional. $150-$300)
• Wood destroying organism inspection* ($50-$250)
• Title search ($250-$500)
• Title insurance (.5-1% of the total price)
• Credit report ($15-$40)
• Appraisal fee ($300-$450)
• Loan origination fees (varies)
• Survey fee ($700-$1,000; dependant on land size)**
• Settlement fee ($250)
• Escrows (varies)
• Documentation preparation fee ($200-$400)
• Mortgage lender fees (varies)
• Tax reimbursements to seller (varies)

*WDO inspections aren’t required in NJ, but they’re often required by lenders (all FHA-backed loans require this)

**Although a land survey is often required by your lender, you can ask the previous owner to supply you with theirs. The lender and title company will typically accept this if the survey is less than 20 years old.

Typical seller closure costs

• Agent commissions (up to 6% of home’s value - unless you use a brokerage like Houwzer, which charges a more fair 1% for listing services)
• NJ Realty transfer fee (average rate of .85%; use this calculator to determine your estimated fee based on home cost)
• Recording fees ($50-250)
• Settlement fee ($250)
• Deed prep ($150)

"In the state of NJ, they do charge a settlement fee. Usually, it’s charged to the buyer and seller- normally it’s between $250 and $300 and the title company will just charge the buyer," explains Geschwein. "This fee that they charge on both sides is kind of unique to NJ, and may come as a surprise to homebuyers."

Although the costs listed here are typical for buyers and sellers, costs can vary depending on a number of factors - so this list may not cover everything you need to pay for.

How do Property Taxes Work When You Sell a Home in New Jersey?

Our guide Sell My House in New Jersey goes further into the tax requirements for home sellers. 

In addition to the transfer fee (nearly 1%), you may need to pay an "exit task" (8.97% of net gain) if you're considered a non-resident. This tax is often misunderstood, though, because it's really just the state requiring you to pre-pay your income tax if it's not automatically withheld. 

You may need to report some of your profit from the home as a capital gain if you don't meet the exclusion criteria (such as using it as a principal residence for at least two years).

“Whenever I am asked about a tax-related question, I always recommend that listing clients talk with a CPA for professional advice,” notes NJ listing agent David Vitarelli. Talk to an agent about NJ closing costs

For Further Reading

• Sell My House in New Jersey: Everything You Need to Know
• Best Places to Live in NJ: 4 Neighborhoods for First Time Homeowners
• Should I Buy a Foreclosure for My First Home? What to Expect