Loading…
A loan closes and funds on June 18. Why does the borrower pay interest at closing?
Because mortgage interest is paid in arrears, prepaid (per diem) interest is collected at closing for the period from the funding date to the end of that month; the first regular payment, due August 1, covers July's interest (12 CFR 1026.38(g)(2) shows prepaid interest on the Closing Disclosure). Source: 12 CFR 1026.38(g)(2) (as at 11 Oct 2026).
Thinking the first payment covers the month it is due.
Practice more SAFE MLO Closing & Funding questions
Exam-style questions with worked answers, then full timed mocks. Free to start.
Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.
Start practicing →Original study material mapped to the public NMLS Content Outline; not a real test question.Not affiliated with or endorsed by NMLS, CSBS or SRR. Verify figures and rules against current guidance before relying on them.