What Are Closing Costs in New Jersey?

Closing costs are fees and expenses incurred by buyers and sellers to finalize a real estate transaction. Paid at closing, these costs are distinct from the property’s purchase price. They add to the overall cost of buying or selling a property. Types and amounts vary based on the transaction and property location.

Types of Closing Costs in New Jersey

Closing costs include fees from various service providers and government entities involved in transferring property ownership.

Lender Fees

Lender fees are common for buyers obtaining a mortgage. These include loan origination fees for processing the mortgage. Appraisal fees cover the cost to determine the home’s market value, required by lenders. Buyers also pay a credit report fee. Discount points are an optional fee paid to reduce the mortgage interest rate.

Title and Escrow Fees

Title and escrow fees ensure clear ownership transfer and fund handling. Title search fees investigate property records to confirm clear ownership and identify liens. Title insurance (owner’s and lender’s policies) protects against future claims on the title. Escrow fees (settlement fees) are paid to the closing company or agent for managing transaction funds and documents. Attorney fees are common in New Jersey, covering legal services for contracts and closing procedures.

Government Recording Fees

Government recording fees are paid to local authorities to record deed and mortgage documents. These fees formalize the change of ownership and the new mortgage lien.

Prepaid Expenses

Prepaid expenses cover costs paid in advance for a period after closing. This includes prorated property taxes. Homeowner’s insurance premiums for the first year are paid at closing. Prorated HOA fees may also be due if the property is part of a homeowner’s association.

Other Potential Costs

Other costs may arise depending on property and transaction specifics. Survey fees determine property lines and features. Flood certification fees determine if the property is in a flood zone, potentially requiring flood insurance. Courier fees may be charged for document transportation. Real estate commissions, typically paid by the seller, are a substantial cost, commonly 5% to 6% of the sale price, split between agents.

Buyer and Seller Responsibilities in New Jersey

In New Jersey, closing cost responsibility is divided between buyer and seller, and some costs are negotiable. The exact split depends on market conditions and sales contract terms.

Buyer Responsibilities

Buyers bear most lender-related fees, including loan origination, appraisal, and credit report fees. They are also responsible for the lender’s title insurance policy and mortgage document recording fees. Prepaid expenses like prorated property taxes and initial homeowner’s insurance premiums are standard buyer costs. Buyer’s attorney fees are commonly paid by the buyer.

Seller Responsibilities

Sellers cover specific costs associated with transferring the property. The real estate commission, often the largest closing cost, is typically paid by the seller (5% to 6% of the sale price). Deed preparation fees are a common seller expense. New Jersey imposes a Realty Transfer Fee (RTF) on property sales, a state transfer tax based on the sale price, generally paid by the seller.

For contracts executed on or after July 10, 2025, a graduated fee (formerly “mansion tax”) for properties over $1,000,000 shifts from buyer to seller, with tiered percentages. Owner’s title insurance, while negotiable, is traditionally a seller’s cost. Sellers pay their own attorney fees.

Negotiation

Many closing costs are negotiable between buyer and seller. A buyer might negotiate for the seller to contribute towards their closing costs, especially in a buyer’s market. Limits on seller concessions exist based on loan type, such as up to 9% of the purchase price for conventional loans or lower percentages for FHA or VA loans.

Estimating and Paying Closing Costs

Prospective homeowners and sellers need to understand how to estimate and manage closing costs. The process begins with initial cost projections and culminates in final payment at closing.

Estimating Closing Costs

For buyers, the lender provides a “Loan Estimate” (LE) document within three business days of receiving a loan application. This three-page form details the estimated interest rate, monthly payment, and projected closing costs. It serves as a tool for comparing offers from different lenders and understanding the financial outlay. Sellers receive an estimated net sheet from their real estate agent or attorney, projecting proceeds after selling costs. Both parties can gather estimates from service providers like attorneys and title companies.

Paying Closing Costs

Payment occurs at closing, the final step where documents are signed and funds disbursed. Buyers receive a “Closing Disclosure” (CD) document at least three business days before the scheduled closing date. This five-page form provides the final closing costs, loan terms, and a transaction overview. Buyers should compare the Closing Disclosure with their Loan Estimate to identify discrepancies and ask for clarification. Funds are typically paid on closing day via certified check or wire transfer to the closing agent (often a title company or attorney). The closing agent facilitates document exchange and ensures funds are disbursed to appropriate entities.