For many people, home ownership is part of the American dream. For most homeowners in the US, getting a mortgage is just one step to that end.
If you’re thinking of buying a house but don’t know where to start, you’ve come to the right place. It covers all the basics of mortgages, including loan types, mortgage jargon, the home buying process, and more.
Mortgage Loan Definition
Before we get started, let’s talk about the basics of a mortgage loan.
First of all, what does the word “mortgage” actually mean?
A mortgage loan, also known as a home loan, is an agreement between you (the borrower) and the mortgage lender to purchase or refinance your home with money provided. This agreement gives the lender the legal right to repossess the property if you default on your mortgage, in most cases without paying back the money and interest you borrowed.
Who gets the mortgage?
Most people who buy a house use a mortgage.
If you can’t pay the full cost of your home out of your own pocket, you’ll need a mortgage.
In some cases, it makes sense to get a mortgage on your home even if you have money to pay it off. For example, investors sometimes mortgage real estate to finance other investments and to take advantage of tax credits.
What is the difference between a loan and a mortgage?
The term “loan” may be used to describe any financial transaction in which one party agrees to receive a lump sum and repay the money.
A mortgage is a type of loan used to finance real estate. A mortgage is a “secured” loan. With a secured loan, the borrower promises the lender a security if they stop making payments. In the case of a mortgage, the mortgage is the house. If you stop paying your mortgage, the lender can take possession of your home in a process known as foreclosure.
How do mortgage loans work?
: When you get a mortgage, the lender gives you a certain amount to buy a house. You agree to repay the loan with interest over several years. The lender’s interest in the home continues until the mortgage is fully paid off. A full amortization loan has a fixed
repayment schedule and is repaid at the end of the loan term.
The difference between a mortgage and other loans is that if you fail to repay the loan, your lender can sell your home to recoup its losses. Contrast that to what happens if you fail to make credit card payments: You don’t have to return the things you bought with the credit card, though you may have to pay late fees to bring your account current in addition to dealing with negative impacts on your credit score.
How Do I Get A Mortgage?
The mortgage loan process is straightforward if you have a regular job, adequate income and a good credit score.
There are several steps you’ll need to take to become a homeowner, so here’s a rundown of what you need to do.