What do closing costs typically include?

Closing costs typically include various fees and expenses that the buyer pays when finalizing a real estate transaction. Loan origination fees and title insurance are prominent components of these costs. Loan origination fees are charged by lenders for processing a new loan application, reflecting the lender's overhead costs and profit margin. Title insurance protects against any defects in a property’s title, ensuring the buyer has clear ownership and safeguarding against potential disputes.

Other options such as monthly mortgage payments, home maintenance, and repair costs, as well as property taxes and homeowners insurance, do not fall under the umbrella of closing costs. Monthly mortgage payments are an ongoing expense that arises after closing, by which the homeowner repays the loan over time. Home maintenance and repair costs are expenses incurred after purchase related to property upkeep, and while property taxes and homeowners insurance are essential for property ownership, they are typically ongoing costs that homeowners manage monthly or annually, not one-time closing costs incurred at the settlement. Thus, the inclusion of loan origination fees and title insurance accurately reflects the typical elements of closing costs in a real estate transaction.