What are the Estimated Reserve/Pre-Paid costs on my GFE?
This section contains items that the bank requires you to pay in advance. The cost in this section normally consists of prepaid interest and tax escrows. Prepaid interest is interest from the day you close until the end of the month. Tax escrows is the number of months of taxes required to fund the escrow account. The amount collected depends on when taxes are due in your area. The insurance collected will be determined based off when your insurance premium is paid through. If you are purchasing a home, most of the time they will want a full years worth of insurance collected. If you choose not to have an escrow account there will not be any taxes or insurance collected and this typically results into .25% built into your interest rate.
