Loans By Kathy: FAQ #2 What are closing costs and pre-paid expenses?

FAQ #2 What are closing costs and pre-paid expenses?

FAQ #2  What are closing costs and pre-paid expenses?


Closing costs are those fees associated with the processing of your loan application.  These can include an origination fee, underwriting fee, processing, fee, title charges, attorney’s fee, state fees for transfer taxes and recording fees.


Some of these charges are tied to the loan amount or purchase price, such as the origination fee, and state transfer fees, mortgage recording fees, and title charges.


The other charges are generally a set fee for all loan transactions regardless of loan amount.


Pre-paid expenses include interest from the date of closing through the end of the month.  It should be noted that mortgage interest run in arrears.  That means when you make your July mortgage payment you will be paying the interest for June.   To further illustrate the example, if you were to close on your new home on May 31.  You would be charged one day’s interest and your next mortgage payment would be due on July 1.


Homeowners insurance and real estate taxes are also part of the pre-paid expenses as those funds are collected to establish your escrow accounts.


For more information about the specifics please call.  Many of these fees vary by state.


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Kathy Sheehan Senior Loan Officer






Bay Equity LLC

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11475 Great Oaks Way, Suite 350, Alpharetta, GA 30002

800.BAY.3703 Bay Equity LLC NMLS ID#76988



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The opinions and general information in this blog are soley those of Kathy Sheehan.  Specifics regarding an individual case should be discussed in detail with a loan professional.  For a confidential consultation, please feel free to contact me via phone or email.  All terms and conditions are subject to change.


Comment balloon 2 commentsKathy Sheehan • June 03 2012 02:19PM


Hi Cathy. You did a good job of explaining that. This is something we need to continue to educate consumers on.

Posted by Cheryl Thomson REALTOR Army Ret, Associate Broker in Northern Virginia ( United Real Estate (703.216.5635) almost 7 years ago

Cheryl, for me it is a daily task!  Pass it on!

Posted by Kathy Sheehan, Senior Loan Officer (Bay Equity, LLC 770-634-4021) almost 7 years ago