Your Mortgage Statement Explained

Key Points

• Your mortgage statement is a document that contains important details about your loan.

• You will receive a statement from your lender or servicer for each billing cycle, and it is a good idea to review each statement for accuracy.

• If you can access your statements online, you may get rid of the paper version, but there are some documents you should never throw away.

Your mortgage statement contains essential details about your loan balance and payments. You should receive a statement from your mortgage servicer each month. Here, we will tell you what a mortgage statement looks like so you know exactly what to expect each month.

What is a mortgage statement?

A mortgage statement contains the most up-to-date details of your loan, including your monthly payments. Your lender or mortgage servicer is required by law to send you a statement each billing cycle.

Mortgage statements are usually issued once a month by mail. You can also find them on your lender or servicer's website. You may receive them electronically, but it may be easier to spot errors on paper than on electronic.

What does a mortgage statement look like?

Part of what your mortgage statement includes is the outstanding loan balance and the loan due date, or when you will pay off the loan in full. The statement will also include a breakdown of some of your payment history.

Your monthly mortgage statement contains a complete overview of your debt and the progress you are making toward paying it off. However, if you want to know what a mortgage statement looks like, here is an example:

Image Source: Bankrate.com

Understanding the details of a mortgage statement

• Account/Loan Number: This is the number associated with your loan. You can see it displayed when you log into your administrator's website. If you contact your administrator for any reason, you must provide this number.

• Due Date: Most mortgage payments are due on the first of the month. If you're set up with automatic payments, this due date reminds you when those funds leave your bank account. If you pay by mail, be sure to send it several days before the due date to ensure it arrives on time. However, servicers usually honor a two-week grace period before charging you a late fee.

• Amount Due: This is the total payment due on the due date, including principal, interest, escrow, and fees.

• Current Payment Due: This section details your monthly payment so you can see how much you're paying in principal, interest, escrow, and any fees.

• Contact Us: You'll find several ways to contact your administrator, such as their phone number and website.

• Account Information: This section usually includes your contact information, the remaining balance of your loan, your interest rate, and when your loan expires (called the "due date"). Is. It may also indicate a prepayment penalty, which is a fee your servicer will charge you if you pay off your loan early. Most mortgages these days don't charge prepayment penalties.

• Transaction Activity: This section provides dates and details of activity in your account for the past month, including when a payment was received. You can also find notice about late fees and their cost here.

• Past Payment Breakdown: This section shows your payment history for the previous month as well as this time of year (“year-to-date”).

How to get your mortgage statement

Most mortgage servicers will send you a monthly mortgage statement. You may receive the statement by mail or your administrator may give you the option to receive it electronically. If you need another copy of your mortgage statement, you can get one by contacting your lender. Many lenders offer access to past statements through an app or online banking portal. Alternatively, you can call your lender or visit a branch to get a copy.

How to review your mortgage statement

If you've been paying off your mortgage for a while, you might want to take a quick look at your monthly statement, make a payment, and get rid of it. But these documents provide valuable information about your credit. The next time you receive a statement, take the time to carefully review the following for accuracy:

• Balance and Interest rate

• Escrow payments

• Any fees

• A delinquency notice

Unless you have an adjustable rate mortgage (ARM), your interest rate should stay the same. If you have an ARM loan, your statement shows how long your current rate will be in effect.

However, the outstanding balance or principal changes when you pay off the loan. You can use this information to help guide decisions about accessing the equity in your home, refinancing it or selling it.

If you don't pay your mortgage automatically, keep an eye on late fees on your statement as well. Most lenders allow a 15-day grace period before charging a late payment fee.

Also, review escrow payments. These go into an escrow account that includes home insurance premiums and property taxes. Because premiums and taxes can fluctuate from year to year, your monthly payment may increase or decrease (perhaps increase) over time.

If you are 45 days or more behind on your mortgage payments, your statement will also include a "delinquency notice." If so, please contact your administrator immediately to explore support options.

How to make your monthly mortgage payments

Mortgage servicers often have several ways to pay off your mortgage, including:

• Automatic payments are withdrawn from a specific bank account.

• Pay online, by phone or mail

• Paying in person

Please note that most mortgage servicers require payment by check or electronic funds transfer. Most organizers do not accept credit cards. Your mortgage statement often indicates how your servicer accepts payments.

Do you need guidance on obtaining an updated mortgage statement to review your loan details? Log into your online account or contact your lender or servicer.

Frequently Asked Questions

How long should you keep your mortgage statement?

It's a good idea to keep your mortgage statements for three years. Even with electronic access, you never know when you'll need a hard copy. If you've noticed problems with your servicer, you may want to keep statements longer as proof of payment.

Do creditors need to send account statements?

Mortgage servicers are required by law to submit a mortgage statement each billing cycle. If the billing cycle is less than 31 days, administrators only need to send you a monthly statement.

Types of Mortgage Lenders and How to Choose

Key Points

• Mortgage lenders finance the purchase, construction, or renovation of a property. They also offer mortgage refinancing and some other mortgages.

• Many types of lenders, including banks, offer mortgages through various channels, such as correspondents, directly or wholesale.

• Some big mortgage names (e.g., Fairway and Rocket Mortgage) are direct lenders. They specialize in mortgages and work with borrowers from origination to financing.

What is a mortgage lender?

A mortgage lender provides financing related to real estate, whether to buy, build, or renovate a property. Some lenders, such as banks, offer other types of loans and services, while others deal exclusively with mortgage loans.

When you apply for a mortgage, the lender evaluates your ability to repay based on your credit and financial situation. The lender then determines whether you qualify to borrow the funds and, if so, how much and at what interest rate.

Your relationship with your lender continues after you get a mortgage. The lender manages the payment process (including helping you navigate assistance options, if necessary) or outsources that work to a servicer.

Types of Mortgage Lenders

There are many types of mortgage lenders, from local and regional lenders to brand-name financial institutions. Here is an overview:

Retail lenders

When you picture a mortgage lender, you probably think of a retail lender. Credit unions and banks fall into this category. They are called retail lenders because, like retail stores, they deal directly with consumers. These lenders almost always adhere to government-mandated mortgage eligibility standards (more on that here), such as minimum credit scores and maximum debt-to-income (DTI) ratios. This happens because the lender can sell your mortgage to investors, providing more capital to make more loans.

Direct lenders

Direct lenders operate similarly to retail lenders, except that while retail lenders may offer other products, direct lenders specialize in mortgages.

Portfolio Lenders

Portfolio lenders offer mortgages they hold in their portfolios rather than sell to investors. As a result, they are subject to only some of the underwriting standards that guide direct or retail lenders.

Wholesale lenders

If you get a home loan through a mortgage broker, there is likely a wholesale lender behind it. These lenders offer the loans they receive through third-party intermediaries who negotiate with borrowers. They do not deal directly with consumers. After closing, many wholesale lenders sell the mortgage to investors and let another financial institution service the loan.

Online lenders

Some mortgage lenders only work online. For example, you can apply for a loan using an online form instead of meeting a loan officer. Because they have less overhead, these digital companies can offer lower rates and fees.

Warehouse Lenders

Like wholesale lenders, warehouse lenders do not interact with consumers. Instead, they provide the financing needed to originate loans to other borrower-based institutions. Warehouse lenders typically offer this financing fixed-term, expecting the sale to close immediately after the loan is completed when the lender receives repayment.

Correspondent Lenders

Correspondence lenders originate your loans but need to service them. Instead, they typically work with larger lenders who buy the loan after closing. This assumes, of course, that they can sell the debt. If they can't, the correspondent lender will be the one who will service your loan.

Hard Money Lenders

Hard money lenders can usually close quickly with somewhat flexible underwriting standards, but they have two significant disadvantages. First, you may have to pay a hefty upfront fee. Second, hard money loans usually have to be paid off quickly. They may be attractive for home buyers, but there are other options for the average borrower.

Bank vs. Non-Bank Mortgage Lenders

A non-bank mortgage lender is simply a lender that does not deal with consumer deposits. This can be an independent mortgage company, an online lender, or both. Other significant differences include:

Banks

Non-Banks

How to choose the right mortgage lender for you

The best way to find the right mortgage lender is to compare offers. Consider the following:

• APR & Interest Rate: The lower the interest rate, the less you will pay. However, the interest rate is only part of the annual percentage rate or APR. APR also includes fees, points, and other lender costs. Compare these figures to understand which lender may be more affordable.

• Convenience: How easy is contacting the lender when you have questions or need help? Do you need to be able to visit the branch? Can you access the online portal to set up automatic payments or view account statements? Can payments be made over the phone or through the app? Consider what is important to you in terms of accessing your lender.

• Reputation: Some lenders are known for customer service, while others have received complaints. See third-party reviews and testimonials to see what previous customers have to say.

Frequently Asked Questions

What is the difference between a mortgagee and a servicer?

A mortgage lender originates and funds the mortgage loan, while a servicer handles the loan after closing, ensuring the borrower pays off the loan. The institution from which you apply for and receive a mortgage may be the same company that services your mortgage and may be serviced by more than one company during the term of the loan.

Who are the largest mortgage lenders?

Home Mortgage Disclosure Act 2022 data shows Rocket Mortgage, United Wholesale Mortgage, LoanDepot.com, Wells Fargo, and Fairway Independent as the top five mortgage lenders.

Key Mortgage Terminology to know: A Guide to Commonly used phrases

If you're financing a home purchase, it's important to understand mortgage terminology. But becoming fluent can feel like learning a new language. To help, here's our guide to key mortgage terms and conditions, from A(PR) loans to V(A) loans, to demystify the process and help you find finance.

Adjustable Rate Mortgage (ARM)

An adjustable-rate mortgage is one in which the interest rate on the loan changes at a predetermined time every six months. There is usually an initial "growth" period when interest rates are particularly low, even lower than fixed-rate mortgages. After that, interest may rise or fall depending on market conditions.

Amortization

Amortization describes paying off a debt, such as a mortgage, in installments over time. Part of each payment goes towards the principal (the amount borrowed), while the other part goes towards interest. A typical mortgage loan can be amortized over a 15- or 30-year term, and the amount allocated to interest and principal will decrease and increase over time. When a loan is fully forgiven or matured, it is paid off in full at the end of the amortization schedule.

APR

The APR, or annual percentage rate, reflects the cost of a mortgage loan. APR, on a broader scale than the interest rate, includes interest rates, discount points, and other loan fees. The APR is higher than the interest rate and better indicates the loan's actual cost.

Cash Out Refinancing

A cash-out refinance is a type of mortgage that allows you to access some of the equity in your home in one lump sum. This process involves taking out a large second mortgage to replace the first mortgage. The new loan combines the outstanding balance of the first mortgage and the cash you take out and comes with a new interest rate and term.

Closing costs

Closing costs are the fees associated with obtaining a mortgage. These include several fees paid when signing or closing a loan, such as origination, appraisal, credit report, and title search fees. Both buyers and sellers incur closing costs, which the buyer often bears, but sometimes sellers cover some of these costs.

Conforming loan

A conforming loan is a mortgage that meets the lending guidelines and limits established by the Federal Housing Finance Agency (FHFA). Guidelines include the borrower's creditworthiness, debt-to-income ratio, and downpayment criteria. Loan limits, which change yearly and vary by county, set the maximum amount of debt that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac are willing to buy or guarantee. By following these guidelines, lenders can sell these loans to Fannie Mae and Freddie Mac, reducing their risk and allowing them to offer better terms to borrowers.

$766,550

The 2024 maximum conforming loan limit in most parts of the U.S. Can be as high as $1,149,825 for high-cost real estate areas.

Source: Federal Housing Finance Agency

Construction loan

Construction loans are short-term financing used to build a home, typically with a one-year term. With this type of loan, you withdraw the money at predetermined stages of the project. There are two main types of construction loans: construction only and permanent construction. The construction loan must only be paid off when the home is completed (or transferred to a conventional mortgage). A permanent construction loan becomes a mortgage when the house is completed.

Conventional loans

A conventional loan is any mortgage not backed by the government but funded entirely by the private sector. Unlike FHA, VA, and USDA loans, which are insured or guaranteed by federal agencies, a conventional loan is backed by the lender that issues it. Conventional loans typically require a 20 percent down payment. Some now charge less but then charge private mortgage insurance (PMI).

Debt-to-Income Ratio (DTI)

The debt-to-income ratio (DTI) measures borrowers' mortgage repayment ability. It is calculated by adding up all the borrower's monthly loan payments and dividing the total by the borrower's gross monthly income. For example, if the borrower's loan payments total $4,000 per month and his gross monthly income is $10,000, the DTI ratio would be 40%.

Accumulation

A down payment is the money a buyer pays in cash to purchase a home. A larger down payment can improve a borrower's chances of getting a lower interest rate. Different types of mortgages have separate minimum payments.

Money Guarantee

Earnest money is a deposit a home buyer makes when entering a Home Purchase Agreement (PSA), usually as a sign of good faith. The deposit is generally held in an escrow account with the title company. When the home sale closes, the equity goes toward a down payment or closing costs. If the sale falls through, the deposit is returned to the buyer or seller, depending on whether the reason for termination was allowed in the PSA.

Equity

Equity is the percentage of your home that you own outright. This represents the portion of your house paid off (and paid for directly through your down payment). For example, if a home is worth $300,000 and your mortgage balance is $100,000, your equity is $200,000. You can borrow against the equity in your home to get cash.

Escrow

An escrow account, also called an impound account, is an account that holds the portion of a borrower's monthly mortgage payment that is earmarked for homeowners insurance premiums and property taxes. Escrow accounts also contain escrow money that the buyer holds between accepting your offer and closing. An insurance and tax escrow account is usually established by the lender or mortgage servicer, which pays the insurance and taxes on behalf of the borrower. This system assures the lender that those invoices have been paid.

FHA loan

FHA loans are mortgages insured by the Federal Housing Administration (FHA). This means the FHA has your back. In case of default, it will compensate the borrower, reducing the risk to the lender (who finances the loan). As a result, FHA loans typically require more flexibility and lower down payments than conventional loans. They are especially popular with first-time home buyers.

Fixed-rate mortgages

A fixed-rate mortgage is a loan whose interest rate remains the same for the entire term (life of the loan), unlike an adjustable-rate mortgage, whose interest rate fluctuates based on market conditions. Borrowers can only renew the interest rate on fixed-rate mortgages.

Forbearance

Forbearance refers to a short break in mortgage payments, usually due to financial hardship. After the forbearance period ends, homeowners can pay off missed payments in one lump sum, enter a payment plan, or request a loan modification.

Foreclosure

A foreclosure occurs if a homeowner stops making payments on their mortgage. This default allows the lender to take possession of the home, as it has served as collateral for the loan. Foreclosure allows the mortgage lender to sell the house and collect the money owed.

Interest Rate

The interest rate on a loan represents what a lender charges someone to borrow money from. It is expressed as a percentage applied to each mortgage payment. A lender's interest rate reflects general market movements and the borrower's risk level. Short-term loans usually have lower interest rates than long-term loans (since the borrower gets their money back sooner). People with better credit scores often qualify for lower interest rates than applicants with questionable credit histories.

Jumbo loan

A jumbo loan is for more extensive and expensive properties that exceed general standards set at the federal level, known as "conforming loans." Most mortgages fall within these favorable limits, meaning banks can only lend a specific amount based on the geographic area where the home is located. For most of the United States, $766,550 is the maximum value. In more expensive areas, the conforming loan limit is $1,149,825 (in 2024). You will need a jumbo loan if you need more money than that.

Loan Estimates

A loan estimate is a standard three-page document containing details about the mortgage given to borrowers when they apply for a loan. Loan estimates include forecasts of interest rates, monthly payments, total closing costs, taxes, insurance, prepayment penalties, and other important information about the loan. Loan estimates are designed to make it easier for borrowers to compare terms when shopping for a mortgage. Receiving one means you have yet to be approved or rejected for a loan.

Loan-to-value ratio (LTV)

The loan-to-value ratio, or LTV ratio, compares the mortgage amount to the property's value. An LTV ratio of 80 percent or less (equivalent to a 20 percent down payment) has been the traditional standard for conventional loans. An LTV ratio above 80 percent means you'll need to purchase mortgage insurance, which is an additional expense. Some government mortgages, such as FHA or VA loans, allow higher LTV ratios and may or may not require mortgage insurance.

Mortgage Insurance

Mortgage insurance is usually required for mortgage loans, with a buyer paying less than 20 percent. The borrower pays the premium, usually as part of their monthly mortgage payment. This additional fee protects the lender if you default on your loan, helping you recover your funds. The two primary types are private mortgage insurance (PMI), which is applied to conventional loans, and mortgage insurance premiums (MIP) on FHA loans.

Non-QM Loans

A non-QM loan (short for non-qualified or non-qualified mortgage) does not meet the Consumer Financial Protection Bureau (CFPB) standards. They are designed to provide financing options to borrowers who do not meet traditional income, financial, or creditworthiness criteria but can still demonstrate the ability to make mortgage payments through alternative means. Because non-QM loans present a higher level of risk to borrowers, they often have different terms and conditions and higher interest rates than standard mortgages.

Origination fee

A lender charges an origination fee to originate, process, and guarantee your loan. In most cases, mortgage origination fees are between 0.5 and 1 percent of the total loan amount and are due at closing.

PITI

PITI is an acronym for the four parts of a mortgage payment: principal, interest, taxes, and insurance. The portion of your payment that covers principal, or the amount borrowed, and interest goes to the lender as payment. Another portion covers property taxes and homeowner's insurance premiums and can be held in an escrow account.

Points

Borrowers can buy discount points, also known as mortgage points, to lower the interest rate on their loans. Typically, a point costs 1 percent of the loan amount and reduces the rate by 0.25 percent (although this can vary by lender). The value of the points is included in the loan estimate and is paid by the borrower at closing. Typically, borrowers purchase points to reduce interest over the life of the loan, so buying them may only be worthwhile if the borrower owns the home long enough to cover the initial cost. Lives.

Preapproval

A pre-approval is a status that a borrower receives from a mortgage lender, indicating they are willing to provide a certain amount of money to purchase a home. This does not mean that the borrower is guaranteed the loan, but it does show that they are in a solid position to obtain financing (which they can demonstrate to sellers through a mortgage commitment letter. ). It is issued when the lender conducts a credit check and gathers financial information about the borrower.

Principal

Mortgage principal is the amount you initially borrowed from the bank or lender - your loan amount. Interest, in contrast, is what a lender charges you to borrow money from. Monthly payments on a mortgage consist of both principal payments and interest payments.

Private Mortgage Insurance (PMI)

Private mortgage insurance (PMI) is a type of coverage that a borrower must purchase when paying less than 20 percent for a conventional loan. PMI protects the lender, not the borrower, from loss if the borrower stops making loan payments. When refinancing, PMI is required if the borrower's home equity is less than 20 percent of the property's value.

Refinance

Mortgage borrowers can refinance with a new loan with a different rate, term, or both, using the new loan to pay off the existing loan. Borrowers are not required to refinance with the same lender that has their current mortgage. A common reason to refinance is to get a lower interest rate, usually because economic factors have lowered rates or the borrower's credit has improved. Another common reason to refinance is to shorten the loan term to pay off the mortgage faster and reduce the total interest paid.

Reverse mortgage

Reverse mortgages are available to homeowners of a certain age (usually at least 62 years old, although some loans are as young as 55) and who have sold their homes. Under this agreement, a lender makes monthly payments to the homeowner. The owner is borrowing from his cash capital. Repayments are tax-free and may also be interest-free (meaning the borrower does not have to make any payments during his lifetime). When the borrower dies, sells, or permanently leaves the home, the lender is returned, or the property is repossessed.

Underwriting

Mortgage underwriting is the process by which a bank or mortgage lender assesses the risk it will take to lend to a particular borrower. The underwriting process considers the borrower's credit report and score, income, debt, and the price of the property they want to purchase. Many lenders follow standard Fannie Mae and Freddie Mac underwriting guidelines when determining whether to approve a loan.

USDA loan

USDA loans (Rural Development Loans) are offered to people who want to buy homes in some rural regions. Issued by private lenders, they are guaranteed by the United States Department of Agriculture. They offer generous terms (no down payment required), but applicants must have a low or moderate income.

VA loan

The US Department of Veterans Affairs guarantees all VA loans. Both active-duty military members and veterans are eligible to apply. VA loans are attractive because they require no down payment, have no loan limit, and can be 100% financed (assuming the borrower is fully qualified).

Mortgage lien: What They Are and How They Work

Key Points

• Mortgage liens are legal claims on property securing a mortgage.

• Property rights can be general or specific and voluntary or involuntary. The right to mortgage is express and voluntary.

• The priority of liens on a property determines which lien will be paid first in the event of default and foreclosure.

• The best way to avoid unnecessary liens on your property is to pay your debts on time.

Mortgage loans are an integral part of the home-buying process. A lien is a financial claim on your property, allowing the lender to take possession of the home if you default. Here's how mortgage liens work, the difference between voluntary and involuntary liens, and how to ensure your mortgage lien doesn't become a problem.

What is a lien?

A lien is a legal claim on your property, which acts as security (or security interest) for your mortgage. This means that if you default or stop making payments on your mortgage, it allows the lender to take possession of your home and sell it to collect the outstanding loan. A lien is a safety net for the lender that gives you the money to buy your house.

Although they may seem negative, the right to a mortgage becomes homeownership for many people. If you make your mortgage payments on time each month, the lien won't prevent you from selling your home or refinancing your mortgage.

What is the difference between a lien and a mortgage?

Although "mortgage" and "lien" are often used interchangeably, they differ. A mortgage is a loan that allows a borrower to purchase a home over time, receive an advance payment from the lender, and then pay those amounts back with interest. A lien is a claim that allows a creditor to seize and sell collateral (for example, your home) to produce an unsatisfied debt. In the case of a mortgage, the lender is your lender.

Read More: Mortgage Rate Lock: What It Is and When You Should Use It

Types of mortgage liens

liens are classified as general or specific and voluntary or involuntary.

What is the difference between a general lien and a specific lien?

General liens are less standard than specialty liens. Key Differences:

• A general lien gives creditors the right to seize the permitted possession if payment terms are not met. For example, if someone doesn't pay their federal income taxes, the government can place a blanket lien on all their assets, including their home.

• Specific liens are attached to an asset and are typically used for larger loans, such as mortgages. For example, if you take out a mortgage for a vacation home, the lender will pay a lien on that specific property, not your primary residence.

What is the difference between voluntary and involuntary property liens?

There are also voluntary and involuntary rights over property. Here they compare:

• Voluntary liens on property are created through a mortgage agreement, which allows the lender to use the property as collateral for the loan.

• Involuntary liens are placed on property without your consent, usually due to unpaid debts. For example, if you can't pay your property taxes, your county or state taxing authority can place a lien on the property.

Can having an involuntary lien damage my credit score?

Undue liens won't damage your credit score. In 2017, all three credit bureaus (Equifax, Experian, and TransUnion) agreed to remove tax and judgment liens from your credit reports. The decision reflects that because liens can be held by more than one party, they often need to be more accurate and complete.

Are mortgage liens bad?

Having a mortgage lien is good if you keep making regular payments on your loan. All mortgage holders have a lien on the property. On the other hand, involuntary liens are placed on properties when owners can't pay their debts, such as property taxes. To sell your home, you'll need to liquidate these liens, which can be challenging if you can't pay the debt.

How do I remove an involuntary lien?

Here are some ways to avoid or get rid of unenforceable rights:

• Be current on all due payments or pay off the loan in full.

• Check your credit regularly to ensure no mistakes could result in an unnecessary lien.

• If you need help making payments, request a payment plan from the tax authority or creditor.

• If it is an incorrect entitlement, dispute it with the issuer.

• Hire a lawyer to resolve the disputed right.

• File for bankruptcy, which automatically wipes out some liens, such as a second mortgage (however, this should be an absolute last resort).

Those last two treatments can be expensive financially and concerning your credit. If you cannot afford to settle the debts, hiring a lawyer to resolve them is impossible. Likewise, bankruptcy comes with some filing fees and, more importantly, damages your credit, making it more challenging to get a loan in the future.

Once you've agreed to remove an unenforceable lien, there are usually a few additional steps to take to end it. For example, if you have paid off your loan, the lienholder must sign a lien release form and send it to the local government office. Depending on where you live, you may have to pay a small filing fee. Your lender may also charge a recovery fee to terminate the lien.

How do I know if there are any mortgages or liens on my property?

In most states, property owners can search for liens by providing the property address to the county recorder, clerk, or assessor's office. You can perform a lien search online for free. You may need to pay a small fee to obtain a copy of the lien.

If you are selling your home, a title search will be performed to determine if there are any outstanding liens on your property. If there are, you must resolve the issue to remove rights before closing.

Read More: Secondary Mortgage Market: What it is and how it Works

Mortgage Lien FAQs

What are the other types of property liens?

There are many property liens, each with its purpose and restrictions. These include:

• Property tax lien: Your state or local government may issue a property tax lien for unpaid property taxes.

• Federal Tax Lien: The IRS can place a lien on your property for nonpayment of federal taxes. This lien can cover your personal property, other real estate assets, vehicles, and financial holdings.

• Homeowners Association (HOA) Lien: In most jurisdictions, your HOA can place a lien on your home if you don't pay your HOA fees.

• Mechanic's Lien: Contractors can place a lien on your home if you don't pay them for work they did on your property.

• Judgment lien: If you lose the case, the plaintiff can file a judgment lien until you pay the amount awarded to the plaintiff by the court. Debt collectors can also get a lien on your property for credit cards, outstanding medical bills, or personal loans.

What is the priority of entitlement?

The priority of liens on a property, sometimes called lien placement, indicates which lien will be paid first in the event of default and foreclosure.

When collateral, such as a home, is sold, the highest or first-priority creditor receives payment first, followed by the second-priority lien, and so on, until the money is exhausted. This means that creditors with fewer rights may only recover some of their losses or may be unable to recover their money.

A lien discount is money owed to the government, such as liens for federal and property taxes. It follows the "first in time, first in right" principle.

What is Lean Release? Lien release means that the lender or creditor removes or lifts the lien on the asset. This is when you pay off the loan. In the case of a mortgage, you will receive a mortgage settlement or repossession document when you pay off the loan and the loan is released.

Will the transaction prevent me from getting a new loan?

You may not be able to get a new mortgage (such as a refinance) or sell your home if there is a lien on the property. Most lenders will not lend on a house with outstanding debt.

The Bottom line

When you get a mortgage, the lender holds a lien on your home until you pay off the loan. This voluntary lien on the property represents the lender's claim on the house, giving them the right to foreclose if you stop making mortgage payments. If you continue to make your mortgage payments, this voluntary lien will not prevent you from selling your home. However, if you cannot pay some debt, you may have an involuntary property lien, such as a property tax or mechanic's lien. Unlike a voluntary lien, a foreclosure can hinder your ability to sell your home, so it's essential to address it.