Final answer:
Closing costs are the fees associated with finalizing a loan, such as origination fees and title insurance, and are paid at the end when the property changes hands. Escrow is a separate arrangement for handling insurance and taxes, while PMI is insurance that protects the lender in case of default.
Step-by-step explanation:
The fees associated with buying and finalizing your loan are known as closing costs. These costs can include a variety of expenses, such as origination fees, title insurance, surveys, taxes, and credit report charges. They are paid at the end of the real estate transaction, when the title of the property is transferred to the buyer.
It's important to note that escrow is a term that refers to a financial arrangement where a third party holds and regulates payment of funds required for two parties involved in a transaction. It helps with the smooth transition of the property by ensuring that the buyer's home insurance and property taxes are taken care of as part of their normal monthly payment. On the other hand, Private Mortgage Insurance (PMI) is an additional fee that may be required if the down payment on the house is less than 20% of the purchase price to protect the lender in case of default.