Closing Costs Explained: Complete Guide for New Jersey Homebuyers
Understand every fee, know what to expect, and learn proven strategies to reduce closing costs on your Bergen County home purchase. Complete breakdown of NJ-specific costs and money-saving tips.
What Are Closing Costs?
Closing costs are the fees and expenses you pay to finalize your mortgage and complete the home purchase transaction. These costs are paid at closing (also called settlement), which is the final step in the homebuying process where ownership officially transfers from seller to buyer.
Closing costs are separate from your down payment and cover services required to process, underwrite, and close your loan, as well as transfer property ownership. While down payment goes toward home equity, closing costs are one-time expenses that ensure the transaction is legally complete and the lender's investment is protected.
In New Jersey, closing costs are typically higher than the national average due to several NJ-specific requirements: mandatory attorney representation for both buyer and seller, higher title insurance rates, municipal transfer taxes, and recording fees that vary by county.
Why New Jersey Closing Costs Are Higher
- Attorney Requirement: NJ is an attorney state - both parties must have legal representation ($1,500-$3,000 per side)
- Title Insurance Rates: NJ title insurance premiums are regulated but among highest in the nation
- Transfer Taxes: State transfer fee ($2-$5.65 per $500) plus municipal taxes (0.5%-1% in many Bergen towns)
- Recording Fees: Bergen County charges $75-$200 per document for deed and mortgage recording
- Property Taxes: High property taxes mean larger prepaid amounts at closing (3-6 months typical)
How Much Are Closing Costs in New Jersey?
New Jersey closing costs typically range from 2% to 5% of the purchase price. The exact amount depends on your loan amount, down payment, property location, lender fees, and services you choose. Higher-priced homes in Bergen County often see costs at the upper end of this range due to attorney fees, title costs, and transfer taxes calculated as percentages.
Bergen County Closing Cost Examples
$400,000 Home Purchase (Hackensack)
Low End (2%)
$8,000
High End (5%)
$20,000
$600,000 Home Purchase (Paramus)
Low End (2%)
$12,000
High End (5%)
$30,000
$800,000 Home Purchase (Ridgewood)
Low End (2%)
$16,000
High End (5%)
$40,000
Cash buyers avoid lender-related fees (origination, appraisal, mortgage insurance) but still pay title costs, attorney fees, recording fees, and transfer taxes. Cash purchases typically have 1-2% closing costs instead of 2-5%.
Complete Breakdown of Closing Costs
Lender Fees (Paid to Your Mortgage Company)
Loan Origination Fee
0.5% - 1.5%Fee charged by lender to process and underwrite your loan. Covers overhead, underwriting, and administrative costs.
Example: $500K loan = $2,500-$7,500
Discount Points (Optional)
1% per pointUpfront payment to reduce interest rate. One point = 1% of loan amount, typically lowers rate by 0.25%.
Example: 1 point on $500K = $5,000
Appraisal Fee
$500 - $800Required professional property valuation to confirm home value supports loan amount. Bergen County appraisals run $600-$800 for single-family homes.
Credit Report Fee
$25 - $75Cost for lender to pull credit reports from all three bureaus (Experian, Equifax, TransUnion).
Processing Fee
$300 - $900Administrative fee for processing loan paperwork, verification, and documentation.
Underwriting Fee
$400 - $900Fee for underwriter to review and approve loan application, verify income/assets, assess risk.
Third-Party Fees (Paid to Service Providers)
Title Insurance & Title Search
$2,000 - $4,000Title search verifies clear ownership, no liens or claims. Title insurance protects lender and (optionally) buyer against title defects. NJ has regulated rates but costs are still significant.
Breakdown: Title search $400-$600 | Lender policy $1,200-$2,000 | Owner policy (optional) $800-$1,500
Attorney Fees (REQUIRED in NJ)
$1,500 - $3,000New Jersey requires attorney representation for real estate transactions. Your attorney reviews contract, conducts title work, attends closing, ensures legal compliance.
Typical: $1,800-$2,500 in Bergen County
Home Inspection
$400 - $700Professional inspection of property condition, systems, and structure. Not required by lender but highly recommended for buyers.
Additional: Radon test $150 | Pest inspection $100 | Septic inspection $300-$500 (if applicable)
Survey Fee
$400 - $900Property survey to verify boundaries, easements, and encroachments. Sometimes seller provides existing survey to save cost.
Recording Fees
$200 - $500Bergen County charges fees to record deed and mortgage in public records. Fees vary by document type and number of pages.
Typical: Deed recording $75-$150 | Mortgage recording $75-$200 | Transfer documents $50-$150
Prepaid Costs & Escrows
Prepaid Interest
VariesInterest charged from closing date to end of month. Earlier closing = more prepaid interest. Closing on last day of month minimizes this cost.
Calculation: (Loan amount × interest rate ÷ 365) × days remaining in month
Homeowners Insurance (First Year)
$1,200 - $2,500First year premium paid at closing. Bergen County premiums average $1,500-$2,000 annually depending on home value and coverage.
Property Tax Escrow
2-6 monthsLenders collect 2-6 months of property taxes upfront to establish escrow account. High Bergen County taxes make this a significant cost.
Example: Ridgewood home with $18K annual taxes = $3,000-$9,000 escrow deposit
Homeowners Insurance Escrow
2-3 monthsAdditional 2-3 months of insurance premiums to establish escrow reserve, beyond the first year premium.
Private Mortgage Insurance (PMI)
VariesIf down payment is <20%, first 2 months of PMI may be collected at closing. Monthly PMI ranges from 0.3%-1.5% of loan amount annually.
Example: $500K loan at 0.5% PMI = $2,083/year = $347/month = $694 at closing (2 months)
Government Fees & Taxes
State Transfer Tax (NJ)
$2-$5.65 per $500New Jersey imposes transfer tax on real estate sales. Rate varies based on sale price and property type. Typically paid by seller but negotiable.
Example: $600K home = $2,400-$6,780 (usually seller pays)
Municipal Transfer Tax
0%-1% variesMany Bergen County municipalities charge additional local transfer tax on top of state tax. Rates vary by town.
Examples: Paramus 1% | Ridgewood 0.78% | Hackensack 0.5% | Fair Lawn 0%
Mansion Tax (on properties >$1M)
1% of priceNew Jersey charges additional 1% tax on homes over $1 million. Typically paid by buyer but can be negotiated.
Example: $1.2M home = $12,000 mansion tax
Who Pays What: Buyer vs Seller Costs
Buyer Typically Pays:
- ✓ Loan origination fees
- ✓ Appraisal fee
- ✓ Credit report fee
- ✓ Lender title insurance
- ✓ Owner title insurance (optional)
- ✓ Buyer attorney fees
- ✓ Home inspection
- ✓ Survey (or verify existing)
- ✓ Recording fees for mortgage
- ✓ Prepaid interest
- ✓ Homeowners insurance (1st year)
- ✓ Property tax escrow
- ✓ PMI (if applicable)
Seller Typically Pays:
- ✓ Real estate agent commissions (5-6%)
- ✓ State transfer tax
- ✓ Municipal transfer tax (if applicable)
- ✓ Seller attorney fees
- ✓ Outstanding liens/judgments
- ✓ Homeowners association fees (pro-rated)
- ✓ Property tax proration (to closing date)
- ✓ Recording fees for deed
- ✓ Negotiated repairs or concessions
- ✓ Outstanding utility bills
- ✓ Payoff of existing mortgage
Seller Concessions: When Sellers Help with Buyer Costs
In buyer-friendly markets or to facilitate sale, sellers may agree to pay some buyer closing costs (called seller concessions or credits):
- Conventional Loans: Seller can contribute up to 3% (down <10%), 6% (down 10-25%), or 9% (down >25%) of purchase price
- FHA Loans: Seller can contribute up to 6% of purchase price toward buyer costs
- VA Loans: Seller can pay up to 4% toward buyer closing costs plus all discount points
- Negotiation Tip: Ask for concessions during offer, especially if inspection reveals issues or market favors buyers
7 Strategies to Reduce Your Closing Costs
1. Shop and Compare Lenders
Lender fees can vary significantly. Get Loan Estimates from 3-5 lenders and compare origination fees, processing fees, and discount points.
Potential Savings: $1,000-$3,000 by choosing lender with lower fees and competitive rates
2. Negotiate Seller Concessions
Ask seller to contribute toward closing costs, especially in buyer markets or if inspection reveals issues. Include in initial offer or negotiate during attorney review period.
Potential Savings: $3,000-$10,000+ depending on market and seller motivation
3. Close at End of Month
Prepaid interest is charged from closing date to month end. Closing on the last day of the month minimizes prepaid interest charges.
Potential Savings: $500-$1,500 in prepaid interest by choosing optimal closing date
4. Shop for Title Insurance and Attorney
While NJ has regulated title rates, you can shop for attorney fees. Get quotes from 2-3 real estate attorneys and compare services and fees.
Potential Savings: $300-$800 by comparing attorney fees
5. Ask About No-Point Loan Options
Skip discount points if you plan to sell or refinance within 5 years. The higher interest rate costs less than points if you do not hold loan long-term.
Potential Savings: $2,500-$10,000 in upfront costs (trade-off: slightly higher monthly payment)
6. Review Closing Disclosure for Errors
Carefully review your Closing Disclosure (received 3 days before closing) for duplicate fees, incorrect amounts, or unnecessary charges. Question anything unclear.
Potential Savings: $200-$1,000 by catching errors or duplicate fees
7. Consider Rolling Costs into Loan
If cash is tight, some lenders allow rolling closing costs into loan amount (increases monthly payment but reduces cash needed at closing). Or choose lender credits option (higher rate in exchange for lender covering some fees).
Trade-off: Reduces cash needed by $5,000-$15,000 but increases loan balance and monthly payment
Bergen County Example: Cost Reduction in Action
Scenario: $550,000 home purchase in Paramus
Original Estimated Closing Costs:
- Lender fees (1.5%): $7,425
- Title & attorney: $4,500
- Appraisal & inspections: $1,200
- Prepaid interest (15 days): $1,250
- Escrows: $6,000
- Total: $20,375 (3.7%)
After Applying Strategies:
- Lender fees (shopped, found 0.75%): $3,713 (-$3,712)
- Title & attorney (shopped): $3,800 (-$700)
- Appraisal & inspections: $1,200
- Prepaid interest (closed last day): $150 (-$1,100)
- Escrows: $6,000
- Seller concessions: -$3,000 (negotiated)
- Total: $11,863 (2.2%)
Total Savings: $8,512 (42% reduction) through strategic shopping and negotiation
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Frequently Asked Questions
How much are closing costs in New Jersey?
Closing costs in New Jersey typically range from 2% to 5% of the home purchase price. On a $500,000 home in Bergen County, expect $10,000 to $25,000 in closing costs. NJ has higher closing costs than many states due to attorney fees (required), title insurance, recording fees, and transfer taxes.
What fees are included in closing costs?
Closing costs include: loan origination fees (0.5%-1.5%), appraisal ($500-$800), title insurance and search ($2,000-$4,000), attorney fees ($1,500-$3,000), recording fees ($200-$500), transfer taxes (varies by municipality), homeowners insurance, property taxes, and prepaid interest. Some fees are paid to lender, others to third parties like attorneys and title companies.
Who pays closing costs - buyer or seller?
Both buyer and seller pay closing costs, but different ones. Buyers typically pay: lender fees, appraisal, title insurance, attorney, inspections, and prepaid taxes/insurance. Sellers typically pay: real estate commissions (5-6%), transfer taxes, and seller attorney fees. In competitive markets, buyers sometimes negotiate seller concessions to cover some buyer closing costs (up to 3-9% depending on loan type).
How can I reduce my closing costs?
Reduce closing costs by: 1) Comparing lender fees and negotiating, 2) Shopping for title insurance and attorney, 3) Scheduling closing early in the month to minimize prepaid interest, 4) Asking seller for concessions (in buyer-friendly markets), 5) Choosing a no-point loan to reduce upfront costs, 6) Reviewing fees for errors, and 7) Rolling costs into the loan (increases monthly payment but reduces cash needed). These strategies can save $5,000-$10,000+.
When do I receive my final closing cost breakdown?
You will receive a Closing Disclosure (CD) at least 3 business days before closing. This document shows final loan terms, monthly payment, and itemized closing costs. Review it carefully and compare to your Loan Estimate. If there are significant changes or errors, contact your lender immediately. The 3-day waiting period allows you time to review and ask questions before signing.
Are closing costs tax deductible?
Some closing costs are tax deductible, others are not. Tax-deductible: mortgage interest (including prepaid interest and points if you itemize deductions), property taxes. NOT deductible: appraisal fees, attorney fees, title insurance, inspections, and recording fees. Points paid to reduce interest rate may be deductible in the year paid if used for primary residence purchase. Consult a tax professional for your specific situation.
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