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.

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).

How to improve your finances before your first mortgage

Key takeaways 

• You increase your chances of receiving favorable terms on a mortgage by strengthening your financial situation before applying.

• Lenders consider several factors when determining your creditworthiness, including your credit score, income and other assets, debts, the ratio of your debt to income, and work history.

• Increasing your savings, lowering your debt, and raising your credit score are all ways to improve your financial profile.

You may need more money saved up or income as a first-time home buyer. It does not imply that you will not be eligible for a mortgage. Before you apply for a home loan, consider these three ways to organize your finances.

Which financial factors are taken into account when applying for a mortgage?

When are you truly prepared to take out a mortgage? A recent Freddie Mac study found that some indications could indicate the yes answer. Among them are: 

• Your credit score: According to the study, a credit score of 661 or higher puts you in the creditworthy category, one of the major determining factors for mortgage approval. Your readiness for a mortgage may be approaching if your score falls between 600 and 660, but it may not be there yet. You must prepare to take on more debt if your credit score is 599 or less.

• Your debt-to-income ratio (DTI): DTI is measured in two ways and is also essential. The front-end ratio should be 25% or less. It is calculated by dividing your projected monthly mortgage obligation by your monthly income. Your total debt, including student and auto loans, makes up your back-end ratio. This can be higher, but most lenders prefer it to be at most 36 percent, with 43 percent being the maximum.

• No bankruptcies or foreclosures: You should have a credit profile free of these blemishes for the previous seven years.

• On-time debt payments: Any payments that are 90 days or more past due should not appear on your credit report.

How to improve your finances before getting a mortgage 

When applying for a home loan, the mortgage lender evaluates every facet of your credit and financial history to determine how risky you are as a borrower. This covers your work history, income, debt, savings, other assets, credit history, and score.

When these factors are combined, the lender can better determine whether to approve or deny you for a loan and how much. Here are three strategies to increase your chances of being granted the desired amount. 

1. Check your credit 

Examine your credit reports and scores well before applying for a mortgage. Weekly credit reports (excluding credit scores) are free from Equifax, Experian, and TransUnion, the three credit bureaus, via AnnualCreditReport.com. The credit bureaus can provide direct access to your credit scores; your bank may occasionally give this information. 

Look for mistakes in your reports, such as misspelled contact details. Contact the reporting bureau to start a dispute claim if you find an error. Make a note of any payments listed as late as well; this will assist you in determining areas that require improvement. 

The lender may consider the middle score when evaluating your mortgage application, considering your scores from all three credit bureaus. Although some loans allow for as low as 500 or 580 if you have other "compensating factors," such as significant savings, most mortgages require a minimum score of 620. Outside of the conforming loan limits, a credit score of at least 700 is needed for a larger loan. 

That said, borrowers with scores of 740 or above receive the best terms and interest rates. Continue reading if your score still needs to arrive. 

2. Work on your debt 

Making your payments on time—which you should already be doing—will help you raise your credit score. Nothing lowers your score more than overdue payments. Make an effort to pay all your bills on time in the months before you buy a house. It's time to get in touch with creditors or service providers if you're having problems paying them back so that you can set up a payment plan or get other help. 

In addition to keeping a track record of timely payments, begin making small payments toward any outstanding balances. There are numerous strategies to deal with them, such as: 

Less debt lowers your DTI ratio—the percentage of your monthly debt payments, including your estimated mortgage payment—about your gross monthly income, positively affecting your credit score. This is something that lenders consider when deciding how much to approve you for.

Most lenders look for a DTI ratio of no more than 45 percent, though some are stricter and cap it at 36 percent. It all depends on the loan program. Some are more accommodating and permit up to fifty percent. This DTI ratio calculator can help you determine your situation.

Finally, refrain from taking out any new loans. This will increase your debt, raise your DTI ratio, and lower your credit score. This is particularly true if you cannot make the extra payments or your credit utilization is already high.

3. Get serious about savings 

You'll need to have a sizeable down payment and closing costs saved up, in addition to general reserves for expenses like furniture or home repairs, unless you qualify for a no-down payment mortgage, which is becoming harder to come by outside of some government-guaranteed loans. This is all on top of an emergency fund that typically covers three to six months' living expenses. 

The typical down payment for a house in the third quarter of 2023 was $35,050, according to data analysts for real estate and property at ATTOM Data Solutions. The good news is that a conventional mortgage can be obtained with as little as a 3 percent down payment. Closing costs typically range from two to five percent of the purchase price, depending on where you're buying. In the most recent year for which data were available, 2021, the average closing costs nationwide were $6,905.

Start saving immediately, even if you still determine how much you can afford to pay for a house. The following are some tactics: 

• Transfer funds designated for the purchase of a home into a high-yield savings account.

• Eat less or avoid going out to eat and other frivolous spending.

• Terminate any unused subscriptions, services, or memberships.

• Sell any furniture or clothes that you no longer need or desire.

What happens if my finances don't get better?

Your income may constrain your ability to save or pay off debt. That's okay; this could indicate that you should put off buying a house or take more time to establish yourself professionally and increase your income.

Do everything you can to keep your credit score intact in the interim. Even if you cannot qualify for or afford a mortgage, you will eventually be able to if you maintain sound financial practices. 

FAQs

How much money should you have before buying a house?

The money you should have before purchasing a home is determined by your desired home size, budget (income and other commitments), and the cash you can afford to pay in full. You must have sufficient funds for the down payment and closing costs when purchasing a home. Having enough savings to cover unforeseen expenses and pay for moving is also critical.

How much are closing costs?

Usually, closing costs represent two to five percent of the principal amount of the mortgage loan.

How much money do I need for moving expenses?

The amount of belongings you need to move and the distance will determine the cost. Angi estimates that you should budget between $883 and $2,552 on average.

Is $50,000 enough to buy a house?

Not entirely, of course, but sufficient to make a down payment. The National Association of Realtors reports that in November 2023, the median sale price of a home was $387,600, and the average down payment was approximately 13 percent. A 13 percent down payment for the median-priced home would cost $50,388. Moving and closing fees are not included in that amount.

When should I start saving for a house?

It is best to begin saving for a home as soon as possible. However, to improve your DTI ratio and be eligible for a better mortgage rate, paying off some of your debt might be wiser before saving for a home if you have a lot of it.

Student Loan Guidelines for Getting a Mortgage

Key Takeaways

• It is still feasible to apply for a mortgage while repaying student loans. 

• Your debt-to-income ratio is impacted if you have student loans. While some lenders may permit a DTI ratio as high as 50%, you should aim for a ratio of no more than 36%. 

• Depending on your situation, it may be preferable to prioritize repaying student loans before making a home purchase. 

You can still be eligible for a mortgage even with student loans if you fulfil specific requirements, such as the maximum debt-to-income (DTI) ratio. This is how the amount includes student loans. 

Can you get a mortgage with student loan debt? 

It is possible to have a mortgage and student loans simultaneously. Your credit score and repayment capacity are the determining factors for your eligibility for a home loan, just like they are for any other kind.

It's only sometimes that having student loan debt lowers your credit score. Your debt-to-income ratio is one of the most important things lenders consider, and student loans will impact it. A high student loan debt load may increase your debt-to-income ratio (DTI) and complicate loan acquisition.

You must determine what monthly mortgage payment you can afford because you must also set aside a portion of your income to repay your student loans. 

How student loans impact your DTI ratio 

Student loan debt is frequently considered when calculating your DTI ratio, a tool mortgage lenders use to determine your borrower's creditworthiness. Lenders use this ratio, computed as your monthly debt payments divided by your monthly gross income, to assess your ability to repay a mortgage. The result is a percentage value.

A mortgage lender will add any required student loan and auto loan payments to your proposed mortgage payment and divide the total by your gross monthly income. The outcome should generally be at most 43%; however, some lenders may accept up to 50 percent, while others may prefer a lower ratio of 36 percent.

"Depending on whether it's a government-backed loan or not, maximum DTI ratios are typically set at 43 percent," notes Melville, New York's debt relief lawyer Leslie Tayne. For the best chance of getting your loan approved, your monthly debt payments divided by your monthly income should exceed 43% at most. Higher incomes, smaller loan amounts, and less total debt will all result in a lower DTI ratio, increasing your chances of getting approved for a loan.