Settlement date at end of month vs. beginning--any benefits? (mortgage, mortgage, fees)

[kibblesandbits]

I've read that there is a benefit to having the settlement date at the end of the month versus the beginning, though our mortgage broker said there was no benefit. What are others' thoughts about this?

[DMenscha]

What benefit did they say there would be? Most of the expenses in escrow are pro-rated on a daily basis, I can't imagine what benefit there could be. Many banks closing on REO properties don't want to close on the last business day of the month, but I think that's more on a workflow basis, rather than any particular advantageous situation.

[MadManofBethesda]

Originally Posted by kibblesandbits

I've read that there is a benefit to having the settlement date at the end of the month versus the beginning, though our mortgage broker said there was no benefit. What are others' thoughts about this?

There is no net monetary benefit; however, if you are short of cash, it is better to settle at the end of the month because you'll need less cash at closing. Let me explain:

If you settle on Friday, February 26, your closing costs will include a pro-rata mortgage payment (not including principal) for the last few days of the month, as well as a pro rata share of property taxes, any HOA fees, etc. Your first mortgage payment would then be due on April 1 for the month of March.

However, if you settle on the following Friday, March 5, your closing costs will include a much larger pro-rata mortgage, tax and HOA payment for 25 days as opposed to only 3 so you will need that much more money at closing. However, your first mortgage payment would not be until May 1, as opposed to April 1 in the above scenario.

So you see, it all works out the same, it is just a question of whether coming up with cash at closing is an issue for you.