California NMLS Practice Test 2025 - Free Multistate Licensing System Practice Questions and Study Guide

Closing costs encompass a variety of fees that are incurred when obtaining a mortgage, and they typically amount to between 2% and 5% of the loan amount. These costs cover a range of services and expenses, including but not limited to appraisal fees, title insurance, attorney fees, and loan origination fees. By understanding that closing costs are a percentage of the loan amount, borrowers can better prepare financially for the total amount needed at the closing table.

In contrast, tax payments, agent commissions, and regular monthly mortgage payments do not accurately represent the full scope of closing costs. Tax payments generally relate to property taxes that may be prorated at closing but are not classified as closing costs. Agent commissions deal solely with the payment to the real estate agents and are not included as part of the mortgage closing costs. Regular monthly mortgage payments, which include principal and interest, are ongoing payments made after the loan is closed and do not constitute a one-time closing cost. This comprehensive understanding of closing costs aids borrowers in navigating the mortgage process effectively.