What are closing costs?

Closing costs refer to the various fees and expenses that are incurred in the process of finalizing a real estate transaction. These costs typically encompass a range of expenses, including but not limited to loan origination fees, title insurance, appraisal fees, credit report fees, and recording fees. Understanding closing costs is crucial for buyers and sellers, as these expenses can significantly impact the overall financial obligations involved in purchasing or selling property.

The other options focus on more specific aspects of a real estate transaction rather than the comprehensive nature of closing costs. Initial payments made at the signing of the purchase agreement pertain only to the earnest money deposit or down payment and do not encapsulate other necessary expenditures involved in closing a deal. Costs incurred during the appraisal process are specifically related to determining the value of the property rather than the overall expenses involved in closing. Payments made to real estate agents for their services are a part of closing costs, but they represent just one specific type of fee rather than the broader category of costs that closing costs encompass.