Prepaid Expenses

  • Escrow Account - This is a separate accounting, tied to your mortgage loan, to keep track of property taxes and homeowners insurance, as well as private mortgage insurance and flood insurance (if applicable), that are deposited into your account in the form of escrows and withdrawn in the form of payments. Once your escrow account is set up with the reserves at closing, the proper amounts are added to your escrow accounting with each mortgage payment. This ensures that the lender will always have adequate funds to pay future property tax, homeowners insurance, private mortgage insurance and flood insurance (if applicable) as they come due.

  • Property Taxes - The County in which the property is located will bill you for property taxes. They cover a full year and are billed in installments due May 10th and November 10th each year. Property taxes are paid in arrears, meaning you are paying this year for last years tax bill.
  • Homeowner's Insurance - When you purchase a new home you are required to purchase, and pay for 12 months in advance, a homeowners insurance policy prior to closing. When you refinance, your current insurance policy must have 4 - 6 months remaining.

  • Pro-rated Taxes - When purchasing a new home, depending on your purchase agreement, you may receive a tax credit for that portion of the year that the seller occupied the property and for which you will be billed the following year.

  • Pre-paid Interest - You are required to start paying interest on your new mortgage from the day your mortgage funds disburse until the end of the month. On a purchase this is the day of closing, on a refinance it's the 4th business day after your closing.

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