Average Closing Costs in New Jersey

In New Jersey, homebuyers who purchase a $200,000 home with 20% down pay can expect to pay an average of $1,181 for lender fees and $913 for third-party fees for a total of $2,094 in closing costs. This amount gives New Jersey the second-highest closing costs in the nation, which averages $1,847. Hawaii has the highest closing costs at $2,163.

In terms of individual closing costs, homebuyers pay an average of $1,124 in origination fees, $415 for a property appraisal, $415 for legal or settlement costs, $813 for a property survey and $125 for inspections. Title insurance fees, which are calculated by the lender, can add as much as $1,000 to the total costs. After submitting their loan applications, buyers receive a good faith estimate outlining all of the closing costs. Lender fees are typically locked in, while third-party fees can vary by as much as 10% at the time of closing.

Few housing markets in the United States have been as slow as New Jersey in recovering from the housing bubble debacle of 2007. Slow job growth has kept the state’s unemployment rate among the highest in the nation, and declining incomes have reduced the number of potential homebuyers. With home values currently at more than 20% below their prior peak, people who bought their homes prior to 2008 are either still upside-down on their mortgages or unwilling to sell their homes at a loss. For homebuyers who can afford the $287,000 median price, they have to contend with some of the highest closing costs in the country. In New Jersey, closing costs can add several thousand dollars to the cost of purchasing a home, so homebuyers are advised to shop and compare costs, since they can vary from lender to lender.

What Goes Into Closing Costs in New Jersey?

Loan Origination Fee: This fee, which covers most of the lender’s costs for processing the loan, usually amounts to 1% of the purchase price. The fee is expressed in points, with one point equivalent to 1%. With most loans, buyers can ask the lender to add points in return for a lower loan interest rate. They can also ask the points be added to the loan as a way to reduce their out-of-pocket costs.

Appraisal Fee: All lenders require a property appraisal to verify the value of the home. Lenders need to ensure that the property’s value supports the sale price and is comparable to similar homes in the area.

Tax Service Fee: In the event of a default, mortgages are subordinate to county tax liens for collection. To protect themselves, lenders may require a buyer to establish a property tax impound account, which is monitored for on-time tax payments.

Settlement Fee: All of the legal functions involved in settling escrow are performed by an agent of the title company. Buyers may hire their own attorneys to review the settlement, but it is an added expense. Buyers have three days from the receipt of a fully executed contract for an attorney to review.

Title Insurance: In New Jersey, buyers are responsible for buying a title insurance policy on the lender to protect it against any liens or encumbrances that did not show up in the title search. Sellers are required to do the same for buyers in order to guarantee a clear title on the property.

Home Inspection: If, as a result of the home appraisal, a lender suspects there might be an infestation, it could require a pest inspection. In some areas, a radon inspection is advisable. If a home inspection is requested, the buyer typically covers the cost.

Mansion Tax: In New Jersey, a 1% tax is applied to the entire value of the home if its price exceeds $1 million.

New York (NY): Average Closing Costs

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