Alabama Real Estate Practice Exam

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What is mainly included in closing costs?

Cost of moving to the new home
Renovation expenses
Credits, debits, and prorations related to the transaction
Application fees for the mortgage

The correct answer is: Credits, debits, and prorations related to the transaction

Closing costs are the various fees and charges associated with a real estate transaction. These fees typically include costs for services provided by lenders, appraisers, title insurance companies, and government agencies. Options A and B, cost of moving and renovation expenses respectively, are not typically included in closing costs as they are separate expenses. Option D, application fees for the mortgage, may be included in the closing costs, but it is not the main component. The main elements of closing costs are credits, debits, and prorations related to the transaction, such as property taxes, recording fees, and loan origination fees.