Prepaid Expenses Not Included
Closing costs are one-time expenses. In addition, the borrowers must be prepared for prepaid expenses at the closing. Prepaid expenses are regular parts of the projected monthly housing payment (interest, insurance, taxes & assessments) that must be paid in advance.
For example, the borrower may be required to establish an escrow account at the time of the closing. The borrower will normally have to escrow two or three months of insurance and real estate tax payments into the escrow account. Also, the borrower must purchase a full year's property insurance coverage prior to the closing.
These prepaid expenses are not part of the closing costs, and normally must be paid by the borrower's own funds. However, the borrower may receive a gift in certain instances to address these funds.
Post a comment