This article outlines making your first mortgage payment and how to setup automatic payments on your mortgage.
First, you need to know about where to make your monthly payment and how to make them.
In about 30 days, you will receive a statement from your loan servicer outlining your loan amount, your total monthly payment and where to make the payment. You should use that statement to send in your first payment.
In the event that you don’t receive that statement by the time your first payment is due, you can use your “first payment coupon”. When you signed your closing documents, included in your closing packet are two coupons that you can tear off and mail back with each of your first two payments. Those coupons have the mailing address and the total monthly payment that you must make, and they will buy you enough time for that first statement to get to you.
It’s also possible that your lender will subcontract or “transfer” the collection or “servicing” of your monthly payments to a new company. If so, they will usually do it before the 2nd payment is due, and they will let you know of this transfer by mail.
Setting up Automatic Payments
For this reason, I recommend holding off on setting up automatic payments from your bank account until the first two payments have been made. It allows everything to settle down for you to know who your final servicer will be.
When you do setup automatic payments, I recommend that you have your bank “push” the monthly payment out to your loan servicer rather than giving your servicer authorization to “pull” payments from your bank account. Personally, I want to control the payments going to someone and not having someone else having the ability to withdraw funds from my bank account.
If you have a fixed rate loan, then the amount due each month for your principal and interest payment will be the same every month until your term expires. However, some components can change, and this will change the total payment you need to make to your loan servicer.
Mortgage Insurance – The amount you pay for mortgage insurance can decline every year for FHA and USDA loans, so the amount you owe will go down. For conventional loans, your monthly mortgage insurance payment will stay the same until your loan amount hits 78% of the original appraised value or original sales price, whichever is less, at which point it will fall off entirely.
Homeowner’s Insurance – Your insurance policy premium could change each year as you change your coverage, add additional coverage, or the value of your home changes.
Property Taxes – You know what they say about death and taxes. It’s very likely your taxes will change each year, and they will most likely increase as your property value increases.
You will receive a notice from your loan service once per year called an “escrow analysis”. This is where they project out how much money they need to collect in your escrow or impound account to pay for property taxes and homeowner’s insurance, and if they project a shortfall or an overage, they will adjust your monthly payment for the next 12 months.
Of course, if you have any questions at all, please don’t hesitate to contact me. We’re here to educate and help you understand the mortgage process.
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