When you’re buying your first home, you probably expect to bring your down payment and some closing costs to the table. What most buyers don’t expect are prorations — and they can throw your budget off by thousands if you’re not ready.

Most agents breeze past this because they don’t fully understand it themselves. But here at House Karma, we break it down in plain English so you’re not blindsided.

What Exactly Are Prorations?

Prorations are adjustments for bills that the seller has already paid but you’re benefiting from once you own the home. Think of it like paying them back for your “share.”

The two most common prorations are:

• HOA Dues – If the seller already paid the $600 quarterly HOA bill for July–September, and you buy the home in mid-July, you’ll owe them for the unused time (your portion of July–Sept).
• Property Taxes – Big one here. Let’s say the annual tax bill is $6,000 and the seller already paid it last December. If you buy in July, you’ll reimburse the seller for the half of the year (July–December) that you’ll own the home. That’s about $3,000.

So, right off the bat, that’s $3,600 you might not have planned for.

Why Does Timing Matter?

Prorations depend on your closing date. If you close in July, you’ll owe the seller half the year’s property taxes plus most of the quarter’s HOA dues. If you close in November, you’ll only owe them for a month and a half of taxes and maybe six weeks of HOA dues.

Here’s an example assuming $6,000 annual taxes and $600 quarterly HOA:

You can see the difference. Closing later in the year means reimbursing the seller for less.

But Wait, There’s More — The Lender Escrow Cushion

Property taxes are usually paid out of your mortgage escrow account. Each month, part of your mortgage payment goes into that account so the lender has enough to pay the tax bill when it comes due.

But here’s the problem: if you close in July, you’ll only have made five escrow payments by December — nowhere near enough to cover the $6,000 bill. The lender doesn’t like that risk. So at closing, they’ll require you to deposit additional months of taxes into escrow upfront.

If you’re closing mid-year, that can easily mean another $3,000–$4,000 due at closing.

The RESPA Cushion Rule

Lenders are also allowed under federal law (RESPA) to collect up to two extra months of escrow as a cushion. So even if your math says six months, your lender may require eight months instead. And yes, even in November or December closings, it’s rare not to see at least one or two months collected upfront.

House Karma Tip

Don’t let prorations sneak up on you. Ask your lender and escrow officer for estimates early, based on your expected closing date. Then budget for the worst case: seller reimbursements + extra escrow cushion. If it ends up being less, great — but if it’s more, you’ll be ready.

Bottom line: Prorations are not optional. They’re part of every closing, and they can make the difference between being comfortably prepared or panicked at the table.