Once you have closed on your purchase home loan or refinance mortgage loan, you will now start getting monthly mortgage statements and will be needing to pay your monthly mortgage payment. Days of providing documents such as updated bank statements, updated paycheck stubs, letters of explanations are now finally over and you can now do whatever you please with your finances. Nobody will question you about irregular or large deposits, minor overdrafts, credit inquiries, or your unreimbursed expenses. The only thing you need to worry about is making your mortgage payment in time and have the mortgage lender off your back. However, there are basics you need to know about your mortgage payment and make sure you do not make minor mistakes that can cause you a lot of red tape and grief later and possibly a late payment on your credit report because your mortgage payment has not been applied correctly.
Common Mistakes With Monthly Mortgage Payments
Many homeowners send in extra monthly on top of their minimum monthly mortgage payment without any explanation to the mortgage lender. The extra funds sent in every month can be applied in several different ways and without any direction, the mortgage lender will not know what to do with it. For example, extra payments can be applied pre-paying for a future mortgage payment because the homeowner goes on a business trip or extended vacation. The surplus monthly payment may be meant to pay down the principal balance of your mortgage loan. The extra monthly mortgage payment can be made to replenish the escrow account or to have a surplus cushion on the escrow account. Without your direction on where the extra payment needs to go to, the mortgage lender will most likely just impound the surplus on a separate account until they hear from you. I would strongly recommend that you contact your mortgage lender to explain why you are paying the extra payment on top of your minimum required mortgage payment and make sure you take notes, take down the name of the representative, the date, the time, and the case number if applicable. Also write your loan number on every check to submit to your mortgage company. Many times, a family member may send in a check to the mortgage company or you may use a different check such as a company check versus a check with your name on it and without an account number written on the memo section of the check, it can create a major nightmare trying to prove that you have sent in the payment.
Paying Mortgage Payments In Advance
If you are planning on going on an extended vacation or business trip and are sending in several months of mortgage payments all in advance, you need to contact your mortgage servicing company and explain the situation on your intention. If you were to send in three months mortgage payments in advance and the mortgage lender does not know you are pre-paying your mortgage payment, the mortgage lender can apply the excess payment towards paying down principal and when the following month mortgage payment comes due and they do not see a minimum mortgage payment from you, they will report you late on the credit reporting agencies. You do not want a 30 day or 60 day late payment on your mortgage payment history. If you are paying slightly more on your monthly mortgage payment to reduce your principal balance, then notify your mortgage company and tell them that is what you are doing so there is no misunderstanding and the extra funds gets allocated to the right place.
Auto Pay For Your Mortgage Payment
Mortgage payments are due on the first of the month and you have a 15 day grace period to make your mortgage payment before the mortgage company will assess a late payment fee for the month. As long as you are not 30 days late on your mortgage payment, it will reflect that you are timely on your mortgage payment. You do not want to be 30 days on your mortgage payment. Not only will a 30 day late payment on your mortgage payment devastate your credit scores, but that late payment history will stay on your credit report for 7 years and you cannot get a new mortgage or refinance a mortgage if you have been delinquent or late payment of 30 days in the past 12 months. You may want to have an automatic payment system set up with your bank where the mortgage company takes the mortgage payment out of your checking or savings account on the 15th of every month to avoid any chances of being late on your mortgage payment.