After the excitement of closing, many new homeowners are surprised by how quiet things become. No mortgage payment is due right away, and the company that sends your first statement may not be the lender you worked with. Understanding how the first months of a mortgage work helps you avoid missed payments and spot scams.
When your first payment is due
Mortgage interest is generally paid in arrears, meaning each monthly payment covers interest for the previous month. At closing, you typically prepay interest from your closing date through the end of that month. As a result, your first regular payment is usually due on the first day of the second month after closing. If you close in June, for example, your first payment is commonly due in August. Check your closing documents for your exact first payment date rather than assuming the timing.
Who you will pay
The company that collects your payments is called a loan servicer. Sometimes it is the same company that made your loan; often it is not. Lenders frequently sell loans or the rights to service them, and servicing transfers are a normal part of the mortgage business. A transfer does not change the terms of your loan.
When servicing changes, federal rules generally require that you receive written notice with the new servicer’s contact information and the date payments should start going to it. Federal rules also provide some protection from late fees during the transition if you mistakenly pay the old servicer. The Consumer Financial Protection Bureau explains these rights at consumerfinance.gov.
Avoid payment scams
Because transfers are common, scammers sometimes send fake letters telling homeowners to send payments to a new account. Before changing where you pay, verify the transfer by calling your current servicer at the number on a statement you already have or in your loan documents, not a number printed in the new letter. Legitimate transfers come with notices you can confirm.
Understanding your escrow account
If your loan includes an escrow account, part of each payment is set aside for property taxes and homeowners insurance, and sometimes mortgage insurance. The servicer pays those bills for you when they come due. Servicers review escrow accounts regularly, generally once a year, in what is called an escrow analysis. If taxes or insurance premiums rose, your monthly payment may increase to cover a shortage. If there is a surplus, you may receive a refund or a lower payment. Read the annual escrow statement closely, and contact your servicer if something looks wrong.
Set yourself up for success
- Create an online account with your servicer as soon as you receive its information.
- Set up automatic payments or calendar reminders well ahead of the due date.
- Keep your contact information current so you receive important notices.
- Glance over each statement for the payment amount and escrow details.
A smooth first year of payments builds a good habit and keeps your homeownership off to a strong start. If questions come up about your loan, start with your servicer, and talk with a financial advisor about broader money decisions.
A First-Ninety-Days Mortgage Checklist
The first few months of a new loan set the pattern for years to come. A short checklist keeps everything in order.
In the first week after closing
- Find your first payment date, payment amount and servicer information in your closing documents.
- Save digital copies of the Closing Disclosure and note in your home records.
- Write down your loan number in a secure place.
Within the first month
- Watch for a welcome letter or first statement from your servicer.
- Create an online account with the servicer and set up your preferred payment method.
- Decide whether to use automatic payments, and if so, choose a date that falls comfortably after your paycheck.
By the first payment
- Confirm the amount matches what you expected, including escrow.
- Make the payment a few days early the first time, in case of any processing delays.
- Check that the payment posted correctly.
Ongoing
- Keep an eye out for any servicing transfer notice and verify it before changing where you pay.
- Note the date of your annual escrow review so a change in payment is not a surprise.
Why Your Escrow Payment Can Change
New homeowners are often surprised when the first escrow analysis changes their payment. Common reasons include:
- A reassessment after the sale. In some places, a property’s taxable value is updated after it changes hands, which can raise the tax bill compared with the estimate used at closing.
- An insurance premium change at your policy’s renewal.
- A homestead or other exemption taking effect, which can lower taxes once it applies.
- An initial estimate that was too high or too low, since the first year’s escrow is based on available information at closing.
If your payment rises because of a shortage, servicers often give you options, such as paying the shortage at once or spreading it over the coming year. Ask your servicer what choices are available.
If Money Gets Tight
Life can change quickly, even in the first year of owning a home. If you ever expect to have trouble making a payment, contact your servicer before you miss one. Servicers often have options for borrowers facing temporary hardship, and those options are usually easier to arrange early than after payments have fallen behind. Be cautious of companies that contact you promising to fix mortgage problems for an upfront fee. A HUD-approved housing counseling agency can offer guidance, and a financial professional can help you look at your overall budget.
Common First-Year Mistakes
- Assuming the lender will remind you. If your first statement is delayed, the payment is still due. Use your closing documents to pay on time.
- Paying the wrong servicer after a transfer. Read every notice and verify it.
- Ignoring escrow statements. A quick look can catch errors, like an insurance premium paid twice or a missing exemption.
- Forgetting your own tax and insurance bills if you do not have escrow. Mark due dates on your calendar.
Questions New Homeowners Ask
Can I make my first payment before it is due?
Usually, yes. Contact your servicer to confirm how early payments are applied.
What happens if my payment is a few days late?
Most loans include a grace period before a late fee applies. Your note and statements explain the terms. Pay as soon as possible and contact your servicer if you anticipate trouble.
Where can I see how much interest I paid this year?
Your servicer typically provides a year-end statement for tax purposes. A tax professional can explain how it applies to you.
