Define Mortgage –
Mortgage is basically a type of loan in which collateral to purchase /build a home, land or other types of real estate. There is an agreement between lender and borrower based on which borrower has to pay to the lender monthly or as per agreed terms in series of regular payments which are divided into principal and interest.
In mortgage, the property is then served as collateral to secure the loan. Borrowers are required to apply for mortgage through their preferred lender. They have to meet other criteria also like minimum credit scores and down payments. Mortgage applications usually undergo a much rigorous underwriting process.
Also the loan varies on the needs of the borrower such as conventional and fixed rate loans. The interest rates will also vary depending on the applicant qualifications and the type of the product. The interest rate will also depend on the loan term and credit score of applicant.
Individuals and companies can use mortgages to buy property without paying the entire price up front. Traditional mortgages are amortizing. It means that the regular payment would stay the same. Different proportions of principal and interest have to pay over the loan duration with each payment.
Mortgage repayments –
Mostly mortgage loan terms are for 30 or 15 years. Mortgage are the liens against property. If the borrowers fails to pay the mortgage, the lender is able to foreclose on the property. The lenders usually ask for evidence that the borrower will be capable of repaying the loan. It may include investment statements, bank statements, tax return and proof of current job. The lender post same will run a credit check on the applicant.
If the application is then approved, the lender will offer the borrower a loan up to a certain amount and at a certain interest rate. Home buyers are able to apply for a mortgage if they have chosen a property to buy or while they are still looking for one. This process is called a pre-approval. Individual who are pre-approved for mortgage are preferring by sellers as they know that buyer will have the money to back up their offer.