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.
