When You Buy a House: When Is Your First Payment Due?

Buying a home often brings numerous financial questions, particularly concerning when the first mortgage payment is due. Understanding these financial aspects from the outset can help ensure a smooth transition into homeownership. This article aims to clarify the schedule of your first mortgage payment and other related expenses.

Timing of Your First Mortgage Payment

Your first mortgage payment is typically due on the first day of the month, one full month after your closing date. For instance, if you close on your home on September 14th, your initial mortgage payment would likely be due on November 1st. This timeframe, often ranging from 30 to 60 days post-closing, is common because mortgage payments are made “in arrears,” meaning your payment covers the interest and principal for the previous month.

Closing earlier in the month might result in your first payment being due sooner than if you close towards the end of the month. Your mortgage agreement and closing documents will specify the precise date for your first payment.

Understanding Mortgage Interest and Your First Payment

Mortgage interest begins to accrue daily from your closing date. To account for this, the interest accumulated from the closing date until the end of that same month is typically collected as “prepaid interest” at closing. This ensures the lender receives interest for the period you owned the home in the closing month.

For example, if you close on January 15th, the prepaid interest collected at closing would cover the period from January 15th through January 31st. Your first full monthly mortgage payment, which would then be due on March 1st, covers the interest for the entire preceding month, in this case, February.

Payments Made at Closing

Beyond your first monthly mortgage payment, several other financial obligations are typically settled at closing. These are distinct from your ongoing monthly payment and include various one-time or upfront costs. Common items paid at closing include prepaid property taxes and homeowner’s insurance premiums. These prepayments often fund an escrow account, which holds funds to cover future property tax and insurance payments.

Lender fees, such as origination and underwriting fees, are also paid at closing. Other closing costs can encompass title insurance fees, which protect against claims to the property’s ownership, and escrow setup fees paid to the company managing the escrow account. While prepaid interest is a component of closing costs, these are all part of the initial financial outlay and separate from your first regular monthly mortgage payment.

Planning for Your Initial Homeownership Costs

Effective financial planning is important for navigating the initial costs of homeownership, extending beyond just the down payment. You should budget for both the various closing costs and your first mortgage payment, which typically falls due 30 to 60 days after closing. These upfront expenses, excluding the down payment, can range from 2% to 5% of the home’s purchase price. For a $300,000 home, this could mean an additional $6,000 to $15,000 in fees.

Having sufficient funds set aside to cover these initial outlays, in addition to your down payment, helps ease the financial transition. Reviewing the Closing Disclosure document provided by your lender is important, as it itemizes all final costs and fees. This helps you create a financial buffer, ensuring you are prepared for all expenses associated with acquiring your new home.