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Ala, Home Buyer in Akron, OH

What is the meaning of "prepaid expenses"?

Asked by Ala, Akron, OH Mon Mar 30, 2009

I have recently made an offer for a bank-owned house in northeast Ohio in which I asked for 3% to be paid towards closing costs, points, and prepaid expenses. The bank accepted my offer, but instead of using the same language, they replaced this sentence with another sentence that stated “closing costs (not to exceed)” and they listed the dollar value of the 3%. I insisted on adding an addendum with the original language. I have two questions: 1- Does it really matter whether the contract says “closing cost (not to exceed) 3%” or “3% to be paid towards the closing costs, points, and prepaid expenses. 2- What constitute “prepaid expenses”?

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Closing costs and prepaid expenses are basically one and the same. 3% is the standard that most banks are willing to pay. Check with your lender to get a HUD statement that will provide you an exact accounting of what the costs are exactly.
0 votes Thank Flag Link Fri Jul 10, 2009
Prepaid expenses are anything you pay before closing such as the cost of a home inspection, any fees paid to lender for credit reports, etc., cost of appraisal if paid by you, or the 1st year's insurance premium. "not to exceed" is normal language, but their language may get them out of "prepaid" expenses, and hold them just to costs at the closing table. Hope that helps....check out my web site! Thanks, Beth Campbell
0 votes Thank Flag Link Tue Mar 31, 2009
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