Mortgage Loan
A mortgage loan is nothing more than a real estate debt instrument. Acquiring a mortgage loan is the most common method of financing a home in America. The benefits are tremendous and the availability of it is dictated both by the risk the borrower presents to the lender, and the present moment of the country’s economy.
Here’s the play-by-play to better visualize the whole idea of a mortgage loan:
Jerry wants to buy a house that costs $200,000. But he doesn’t have 200k to spend at once - or he does but spending that amount of money will damage his cash flow. Because he doesn’t want to have a house but live miserably – plus, every new house comes with hidden costs…- he goes to a mortgage lender to ask for a mortgage loan.
The lender checks Jerry’s credit score and puts it against the price of the house to figure out if they are willing to take the risk on Jerry’s dream and financial health. If they are, then the mortgage loan is on. They will pay the $200,000 directly to the home seller and sign a contract with Jerry to allow him to move the home, that is “jointly owned” by the bank and Jerry. Now, every month, Jerry has to pay a certain amount of money combined with a specified (and agreed by contract) amount of interest that is deducted from the total amount. With every payment, Jerry acquires more equity to the home.
If everything goes along smoothly, Jerry pays the mortgage loan in its entirety, erases his debt, and the house becomes 100% his, thank you very much mortgage lender bye-bye.
However, if it doesn’t… big problems ahead.
A mortgage loan basically means that, as collateral, is the house itself. If something happens and Jerry defaults too much and fails to terminate his debt in a timely manner, the house goes in foreclosure and heads to auction so the lender can return its investment, and Jerry – having paid from 1% to 99%; doesn’t matter – loses everything.
Real Estate tip:
Here’s a great sort of mortgage loan: we will give you the best local real estate agents and you’ll give us… well, nothing because The OFFICIAL Real Estate Agent Directory® is 100% FREE! So I guess it’s not a mortgage loan after all, right? It’s just amazing. Yeah, we think so too. Enjoy!
Popular Real Estate Terms
Estimated market price property could bring using currently accepted appraisal methods. This might not be the same as the market price at any one given time when the seller is compelled to ...
Upgrading made by a lessee to leased property. Examples are paneling and wallpapering. These improvements revert to the lessor at the expiration of the lease term. As improvement costs are ...
Insulation covered on each side by a material, such as metal. ...
What does contribute mean in everyday scenarios? The official “contribute definition” goes as follows: providing a thing of great value, regularly money, to help accomplish a ...
Those factors causing the movement of people, industry, and business from the central city to the outside central city areas, suburbs, and/or small cities. Elements of the dispersing force ...
percentage relationship of a specific part of property to the whole property. An example is the square footage of one office to the square footage of all offices in an office building. ...
Linear measurement of property abutting a road or water body acting as a boundary market. ...
Once of a set of timbers used in the construction of a building or for esthetic purpose, the land around a property for beautification. ...
member of the National Association of Real Estate Brokers, Inc. ...
Have a question or comment?
We're here to help.