5. Capitalized Interest

The Company capitalizes interest costs to land under development during the active development of finished lots. Capitalized interest is transferred to sold or unsold inventory as the development of finished lots is completed, then charged to cost of sales upon the Company’s settlement of homes and the respective lots. Interest incurred during the period in excess of the interest capitalizable based on the level of qualified assets is expensed in the period incurred. NVR’s interest costs incurred, capitalized, expensed and charged to cost of sales during the three and nine months ended September 30, 2013 and 2012 was as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Interest capitalized, beginning of period	$	2,454		$	—		$	893		$	—
Interest incurred		6,287			1,678			18,801			2,201
Interest charged to interest expense		(5,682	)		(1,511	)		(16,622	)		(2,034	)
Interest charged to cost of sales		(38	)		—			(51	)		—

Interest capitalized, end of period	$	3,021		$	167		$	3,021		$	167