What are closing costs?

Closing costs refer to the various fees and expenses that are associated with finalizing a real estate transaction. These costs typically occur during the closing phase when ownership of a property is officially transferred from the seller to the buyer. Closing costs can include a wide range of charges such as loan origination fees, title insurance, appraisal fees, inspections, attorney fees, and more.

Recognizing the significance of closing costs is essential for anyone involved in a real estate transaction, as they can add a substantial amount to the overall cost of purchasing a home. The other choices relate to aspects of real estate but do not capture the full range of expenses incurred at the end of a property transaction as vividly as the correct answer does. Therefore, understanding closing costs is crucial for budgeting and financial planning in the context of buying real estate.