Prepaid items are costs that a borrower pays in advance at closing, such as interest, property taxes, and homeowners insurance. These are often collected to set up escrow accounts for future payments. Real estate taxes paid at closing are a classic example of a prepaid item.
“Prepaid items are charges that are paid in advance at closing for items such as interest, property taxes, and insurance premiums.”
— CFPB, Your Home Loan Toolkit
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