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December 20th, 2013

9: Prepaid items vs. closing costs—what’s the difference?



prepaids-closings 8.17v1Number nine on our list of the top-10 articles for 2013 — Prepaid items vs. closing costs—what’s the difference? –   is a practical, back-to-basics article on deciphering all the different items you must pay at the closing table. Like number 10, this article was written a few years ago.

One of the goals of HSH.com is to create content to help educate our visitors. Too often, consumers enter the mortgage process without a proper understanding of all the ins and outs. Granted, the mortgage process is a confusing one with a lot of moving parts; but that’s where we come in.

Articles like “Prepaid items vs. closing costs—what’s the difference?” are designed to be easy-to-read, step-by-step instructional pieces that can help you find the cheapest mortgage loan available.


There’s no doubt that mortgage settlement statements can be confusing to the layperson. There are no instructions to explain the forms, and the document bears little resemblance to the Good Faith Estimate.

For all of its line-item fields, though–and there are 143 of them(!)–the areas that tends to confuse homeowners the most are the ones collectively known as “prepaid items.”

What are “prepaid items?”

“Prepaid items” are exactly what the name implies–payments made in advance of the monies being due.

With respect to mortgages, there are 10 types of prepaid items, the most common of which are:

  • Mortgage interest that will accrue between the closing date and month-end
  • Real estate taxes paid into an escrow account
  • Homeowners’ insurance paid into an escrow account

Be sure to read “Prepaid items vs. closing costs—what’s the difference?” in its entirety.


10: Buying a new home when you haven’t sold the old one

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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