What is a Mortgage?
Summary: A mortgage is a type of loan used to purchase real estate properties. Because most buyers do not have cash readily available to purchase a property, a housing loan allows them to purchase a home. Buyers can choose the length of the mortgage term; a 15-year or 30-year fixed rate loan, adjustable-rate loan, or a flex term are commonly chosen. In addition to the term, buyers can choose different loan options that best fit their needs.
A mortgage is a type of loan used to purchase real estate properties. A mortgage is an agreement between the buyer and the mortgage lender to pay the loan amount over a set number of years along with interest. The housing loan is a secured loan and serves as collateral; the lender can foreclose the property if the buyer falls behind in the repayment of the housing loan. Buyers do not have full ownership of the property until the home loan is paid off and their title is received.
A majority of buyers do not have cash readily available to purchase a home, this is where a mortgage comes in. Buyers can put a small down payment on a property, purchase the home, and pay the remaining balance over a designated set of years. The goal behind a mortgage is to make homeownership more obtainable.
There are different types of mortgages and home loan options to help buyers in all situations. Buyers can choose the length of their mortgage term; a 15-year or 30-year fixed rate loan, adjustable-rate loan, or flex term are commonly chosen. In addition to the term, buyers can choose different loan options that best fit their needs.
A few factors are evaluated when homebuyers apply for a mortgage. One of the requirements is a financial background check. Mortgage lenders will verify the buyer’s credit score, debt-to-income ratio, loan-to-value ratio, and income before moving forward with the mortgage process.
Click here to learn more about your monthly mortgage payments and what they consist of.
For all your mortgage needs, below are some additional resources!
- Common Mortgage Term?
- What are Interest Rates and Why are They Important?
- What is a Down payment?
- What is Equity?
- What is Escrow?
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