What are closing costs in the context of mortgage transactions?

Closing costs in mortgage transactions refer to the various fees and expenses that are incurred in the closing of a real estate transaction, which occur at the end of the mortgage process. Option C is correct as it specifically highlights that these costs are related to the funds used to complete the settlement of the sale. This includes a variety of expenses such as lender fees, title insurance, appraisal fees, and prepaid taxes, which are necessary to finalize the transaction and transfer property ownership.

Understanding closing costs is crucial for borrowers as it impacts the overall amount needed to close a loan, in addition to the down payment. These costs are necessary to prepare and execute the closing documents, and to ensure that all financial obligations related to the mortgage and property transfer are met, making the deal ready for settlement. Thus, they represent an essential part of the financial transaction in obtaining a mortgage.