Prepaids and Escrow Account  
Category: Buyers, Financial Process


Total settlement expenses at the time of closing include monies to pay prepaid items and establish an escrow account.  Escrow or Impound Accounts are funds held in an account by the lender to make payment for property taxes and homeowner’s insurance as they are due.


Monthly mortgage payments include principal, interest, taxes, and insurance (PITI). Some mortgages also include mortgage insurance.  These items will be prepared and/or escrowed monthly by the lender.



Homeowner’s Insurance

Fourteen or fifteen months of insurance will be collected at closing.

Twelve months will be paid to your insurance company to pay one year in advance.

Two or three months will be put in an escrow account by your lender for future insurance payments.



Property Taxes

Approximately 2-4 months of taxes will be collected and put into an escrow account for year end tax payment.

Tax expenses from January 1st through the date of closing will be collected from the seller.



Prepaid Interest

Since interest charges incur after the money is used, daily interest on the loan will be collected from the date of closing to the first of the month.

Mortgage payments thereafter will include interest cost for the preceding month.

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Susan Palmer
Legacy Real Estate
4400 North Big Spring, Suite 101
Midland, Texas 79705
432/687-6500 Main
432/978-7816 Cell
432/687-6513 Fax


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