What Is A Mortgage?
a mortgage is a loan used to purchase a home where the property serves as the borrower's collateral. let's look at ?, who wants to buy a new house with $200,000. like most people, he doesn't have nearly ? in savings. however, he is satisfied $40,000 in cash or 20% of the home's value. he goes to his local lender, smith-jones bank, to apply for a 30 year mortgage that recover the remaining 80%. as a condition, ? agrees to make monthly payments to the bank that recover part of the original loan amount that is the principal as well as interest. the prospective home buyer can decide whether to get an adjustable rate mortgage where the interest payments could change over the course of the loan or a fixed rate loan. if ? wants the predictibility of a steady monthly payment, he will pick a fixed rate loan. before fronting $160,000, the bank needs to be confident that ? can pay it back. lenders always have some protection in the form of the lein placed on the property. should ? fails to make his monthly payments, the bank can romove him from the house and resell it to another buyer, a process known as for closure. however, for closures can cost a bank considerable time and expense. so, as an extra precaution, the smith-jones' underwriting department take a close look at ?'s finances before deciding to extend the loan. as with most banks and specialized mortgage lenders, they look at his credit history, income and assets. once the application is approved, ? can proceed ? transaction and look for to living in his very own home.