Can a Home Buyer Save Money on Real Estate Closing Costs in NJ?

According to a Bankrate survey published In an article on July 21, 2011 in the Star Ledger, “New Jersey has the 7th highest real estate closing costs”.

The purchase of a home requires a down payment, transaction expenses and closing costs. While not necessarily considered closing costs, home buyers must be prepared for transaction expenses directly related to the home purchase, such as a home inspection, termite inspection and radon test, a mortgage application fee, an appraisal fee and perhaps a few others. However, it is the amount of the real estate closing costs that surprises most home buyers.

Real estate closing costs are an important financial consideration when purchasing a home. These are the types of fees and costs related to the purchase of a home which a home buyer must be financially prepared for, and are commonly referred to as real estate closing costs.

• Attorney Fee
• Title Insurance Policy
• Searches
• Survey
• Recording Deed and Mortgage
• Real Estate Tax Escrow
• Loan Origination Fee
• Lender Fees
• Home insurance Policy
• Escrows(Homeowners Insurance, Mortgage Insurance(MIP or PMI, if applicable)
• Miscellaneous
• Interest Expense(per diem interest charges from day of closing to the last day of the month

Is it possible for home buyers to save money in transaction expenses and closing costs in a home purchase?

Yes! There are potential savings available to home buyers! 

According to Marianne Tamburello, a Colonia attorney:
“Closing costs in New Jersey are the seventh highest in the country according to a recent Star Ledger article. That statement would make any potential homebuyer think twice! However, this article referred to the rise in closing fees charged by lenders. There are still ways for the potential homebuyer to keep the total amount of closing costs within budget. Two of the most significant expenses in purchasing a home are the cost of the title insurance and survey.

All lenders require title insurance. In New Jersey, the cost of the title insurance is fixed by state statute. Title insurance, therefore, costs the same no matter what company your attorney deals with. But, a portion of the title insurance cost will be reduced if the attorney provides “back title” information to the title company. What is “back title information”? Back title information means the current deed, survey and title policy which the seller may have in their possession. Your attorney or realtor can request these documents from the seller shortly after the contract is signed.

When an existing policy is provided on a new title search order, the title company will use “re-issue rates” for the amount of the present title coverage. For example, the seller purchased the house for $200,000.00 , has a title policy for that amount and is now selling the home for $250,000.00. By providing a copy of that policy to the new title company, $200,000.00 of the title insurance costs will be billed at the “re-issue” rate with the balance billed at the basic rate…resulting in a savings of over $200.00!

A survey can cost over $600.00 depending on the size of the property. Unlike title insurance, a new survey may not be required by the lender. Although the cost of a new survey will be disclosed on the lender’s Good Faith Estimate of Closing Costs, the homebuyer or attorney should ask whether the lender will accept the seller’s survey with the raised seal of the surveyor or if one is even required at all! Generally, the lender may accept an existing survey if no major changes (i.e. an addition to the dwelling, addition of a strip of land to the property) have been made and the survey was done within ten years of the closing date. Occasionally, a lender will not require a survey at all as long as the title company will insure the property without one.

Nobody disputes that buying a home can be expensive but just asking a couple of very simple questions can save a homebuyer almost $1,000.00!”

Mortgage lenders are competitive, with interest rates and lender fees, be it a bank or mortgage company. Yes, bank lending fees have increased recently due to increased underwriting guidelines, but there is the potential for home buyers to save money when selecting one lender over another. Home buyers should rely on recommendations and referrals from their REALTOR and Attorney and then compare lender’s interest rates, origination fees, lender fees and application fees. Savings are possible, and without much effort!

In addition, a home buyer can save on interest per diem charges at closing. This is something where most home buyers can truly save money simply by planning in advance, and what few buyers are aware of in advance. At closing, there will an interest per diem expense calculated from the day of closing to the last day of the month. A $200,000 mortgage at 5% would equal a per diem interest expense of $27.40. A closing on the 10th of the month would add $575.40 to the closing costs as compared to a closing on the 27th of the month which would be $109.60. A savings of approximately $466 just for closing near the end of the month.

Considering a home purchase? Surprises are for Birthdays, Not Buying a Home!

Obtaining a reliable estimate of anticipated real estate closing costs is very important. They do represent a large expense. Here are the type of professionals you need to meet with a realtor, a mortgage professional, and an attorney and rely on them to obtain the information to make the home buying experience a pleasant one!

About the Writer: David Fialk, REALTOR is Broker Owner of Choice Realty Co in Iselin, New Jersey and regularly posts real estate articles of interest for home buyers, home sellers and home owners on his Blog: Just Real Estate Talk