Home Closing Costs in NJ – What Buyers Should Know

Closing Costs in NJ

Many first time home buyers assume that the down payment is really the only item they need to have money for when buying a home. Nothing can be further from the truth. When buying a home, typical closing costs in NJ can add up to between $8,000 – $10,000. These costs are in addition to the down payment required for the mortgage. These closing costs in NJ are made up of the property taxes (and HOA fees if they apply), home inspection fee, loan closing costs including the appraisal, and buyer side title insurance. Real estate agent commissions could be a factor, but these are usually already set between the listing agent and the seller, and do not directly affect what the buyer will pay. Read on for all of the details about home closing costs in NJ!

Property Taxes & HOA Fees

When you buy a home with a mortgage, the mortgage company will require that a portion of the property taxes are be paid up front at the closing by the buyer. The mortgage company will hold this amount in escrow to avoid not having available funds to pay for the property taxes every quarter. Usually, you will need to have 1 quarter of property taxes in escrow at the very minimum. If there happens to be an HOA associated with the home purchase, a portion of the HOA fees will also need to be held in escrow. Also know that both HOA fees and property taxes will increase your monthly mortgage payment.

You may ask, how much does a home buyer usually spend on property taxes and HOA fees. The answer to this question all depends on the size and location of the property. There is not one specific amount. Some houses are $6,000 per year in taxes, while larger ones have more than $15,000 per year in taxes. This varies widely by the town and the state. NJ has one of the highest property tax rates in the nation. If you are looking to save money on taxes, your best bet may be to buy a small home in NJ that does not have much land or square footage. This could help reduce the amount of property tax you will have to pay.

The Home Inspection

A home inspection is one of the most important items on a home buyers list. This is something that should not be taken lightly. Without one, you will not be aware of any potential problems with the property that can end up costing you money down the road. The cost of a home inspection in NJ is usually around $550 give or take a little bit depending on the overall house size. It can also increase in price if you decide to include a radon test, a sewer pipe scope, and termite testing. It’s recommended to include all of those extra items, as any related repairs to those things can be costly. To save money  on a home inspection, shop around and negotiate with the inspectors. Ask them if they can match another companies lower price. Additionally, ask your Realtor for references as they may have an existing relationship with a home inspector that can save you some money.

Mortgage Fees & Down Payments

When it comes to underwriting and approving a mortgage, there are closing costs you need to be aware of. Earlier we discussed having to hold property taxes and HOA fees in escrow. These two items are part of the mortgage loan closing costs. In addition to these costs, you will have to pay a mortgage origination fee, and the fee for the home appraisal. Based on the average home sales price in this state, the total loan closing costs in NJ can be between $6,000 – $7,000. However, it is important to remember these can vary widely depending on the size of the house and the taxes associated with it. One thing NJ home buyers can try to do to avoid having to bring so much cash out of pocket, is to try to get a seller side credit. To work out a seller side credit, the buyer can present an offer with a price that is higher than the price they are willing to pay. By doing this, the buyer can write in the contract that the extra funds they presented with the offer will go towards their closing costs. If the home seller accepts your proposal, you can roll your closing costs into the mortgage, which will reduce your cash requirement for the closing.

On top of the loan closing costs we just discussed, the buyer will have to have cash for a down payment. In New Jersey, there are a number of down payment options for mortgages. The best options available to you as a buyer will depend on how much money you have, and how good your credit score is. Many loans have down payment options that range anywhere from 3.5% to 20% of the purchase price. If you happen to be a veteran, you can get a VA loan that requires 0% as a down payment.

Buyers Title Insurance

The buyers title insurance is also paid for by the buyer. In NJ, this is calculated based on the sales price of the home, and specifics relating to your down payment and mortgage. Based on recent average home prices, this can generally be around $1,400-$1,500.

Real Estate Agent Commissions

In NJ, the buyers agent commission is not paid by the buyer. They are actually paid for by the seller. The commission is negotiated between the seller and the listing agent. The listing agent will then offer a portion of that commission to any agent who has a buyer. Some buyers think you can try to work directly with the listing agent in hopes of getting a better deal, but most listing agents will not change the commission whether they work with the buyer or not. If they are willing to change the commission if they represent the buyer, they have to disclose this in the listing to other agents. Furthermore, a special scenario could arise where a buyer may have to pay their real estate agents commission. However, this would only happen if the buyer advises their real estate agent that they would like to look at For Sale By Owner properties. With For Sale By Owner properties, the buyers agent is not guaranteed a commission, unless they get an agreement from the seller directly. If the seller is not willing to pay the buyers agent commission for bringing them a buyer, the buyer may be required to pay the commission. This may only happen in very rare situations. As a buyer, you do not have to worry about being blind sided by a situation such as this, as it is not common, and it would have to be previously agreed to between you and your agent if it were to occur. To sum it up, buyers do not have to pay the real estate agents commissions. The commissions are paid for by the seller from the proceeds of the sale.


Home closing costs in NJ can sometimes be complicated. If you’re not sure exactly how much money you will need to buy a home, it’s best to talk to a professional real estate agent. They can advise you on the specifics, and help you in ways that you may not have thought of. Even if you are 1 or more years out in the buying process, it is always best to get professional advice. A good real estate agent can help you get started and guide you along the way to achieving your home ownership dreams.

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