HUD Settlement Statement Prepaid Mortgage Interest

We closed on our home on August 3. At closing we received a Note, First Payment Letter and First Payment Coupons showing the first payment as October 1st. Our loan was purchased by a secondary lender on September 5th. We received a notice that the firstpayment was September 1. The lender is stating that a HUD-1shows the correct date, but there is not a date on that.Can the lender move up our first payment date a whole month when all of the documentation from closing states October 1st?

1 Answer

The short answer to your question is no, the new lender cannot do that, but you should be able to tell very easily by looking at your HUD 1 settlement statement.

In a mortgage, we live in the house for a month, and then our payment is due at the end of the month. For example, your June payment is due on July 1st.

Since mortgage lenders have decided to make a standard mortgage due date as the 1st of the month, they had to come up with a way to collect interest for the number of days you legally owned the home in the month you bought it. They could have done this by making the first payment occur on the first day of the month immediately following your closing month, but instead they use the "prepaid interest" system. Prepaid interest is the amount of money you pay for the remaining days in the current month at the time you close.

It's easier with an example. If you close on August 3rd, you should have been charged interest for the 28 days you'd be living in the house in August without making a payment. Then on October 1st, your first full payment would be due for September.

So the important thing to look for is whether or not you were charged for the 28 days of interest remaining in August. If so, it's simple math that no payment is due until September 1st.

In some cases, however, lenders do an " interest credit," where they actually have your first payment in less than 30 days. In this case, you would actually get a small credit for the number of days that have passed in the current month. If your lender listed your first payment as October 1st, it doesn't sound like an interest credit came into play here. The easy answer is to check the prepaid interest on your HUD and go from there.