Prepaids

Prepaids are money you would owe anyway, just collected early. At closing the lender seeds your escrow account with a few months of property taxes and homeowners insurance, plus interest that accrues from the closing date to your first payment. The point is to make sure the escrow account has a cushion when the first tax or insurance bill arrives.

Because they depend on the calendar, prepaids vary with your closing date and the timing of local tax cycles. Closing right before a tax due date usually means collecting more. They are genuinely separate from closing costs, which are service and origination fees, even though both show up in your total cash to close. Exact amounts vary by location and lender.