When closing on a home mortgage, prepaids are typically collected, representing recurring items such as interest, taxes and insurance. Interest is charged from the day of closing to the end of the month, so you may reduce your prepaids by delaying the closing to the end of the month. You may also reduce your prepaids by requesting an escrow waiver, but then you must be prepared to pay your taxes and insurance out of pocket when they become due. Typically, an escrow waiver is permitted only with 20% down and payment of a .25% escrow waiver fee, with some exceptions.
