Do you know the difference between Closing Costs and Pre-Paid?

Of all the expenses that come with buying a home, there's one category that can catch buyers by surprise: prepaid costs. And while surprises can be exciting, you definitely don't want them during the home buying process. So, let's dive into what you need to know about prepaid costs.

Prepaid costs are upfront cash payments that you make at closing to cover various mortgage-related expenses before they're actually due. These funds are held in escrow until they're needed. The prepaid costs typically include:

• Initial escrow deposit: This is an amount you pay upfront to establish your escrow account, which is used to pay for expenses like property taxes and insurance throughout the year.

• Homeowner's insurance premiums: You'll need to pay the premiums for your homeowner's insurance policy in advance to ensure coverage for your new home.

• Real estate property taxes: Depending on when you're closing, you may need to prepay a portion of the property taxes for the remaining months of the year.

• Mortgage interest: Since mortgage interest is typically paid in arrears, you'll need to prepay the interest for the period between your closing date and the start of your first mortgage payment.

It's important to note that prepaid costs are separate from closing costs. Closing costs encompass other fees involved in the home buying process, such as the title search, inspection fees, appraisal, and the cost of processing the loan.

If you're considering buying a home and want to avoid surprises, it's crucial to understand and budget for prepaid costs. By working with us, we can help you crunch the numbers and ensure you have a clear understanding of all the expenses involved. Don't let unexpected costs derail your home buying journey. Contact us today, and let's guide you through the process with transparency and peace of mind.