Fees paid on the closing date to cover future costs like property taxes, interest, mortgage insurance and hazard insurance

Lenders want to make sure that their investment is secure, so they may require you to deposit a sum of money in an escrow account to prepay recurring costs, such as: (1) your first 6 months of property taxes (2) your first 2 months of hazard insurance and (3) your first 2 months of mortgage insurance, if required.

The lender also collects the interest you owe for the period between the closing date and the end of the month. So, if September 3 is your closing date and you make your first monthly loan payment on November 1, you have to prepay the interest that's due through the end of September.

See: Impound account, Closing costs