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
Levied on those benefiting from the installation of a sewer. ...
Standard unit of area that is used to measure a parcel or real estate. Square footage is computed by multiplying the length and width dimensions of a room, building, lot, etc. ...
Assures that the title is free of any legal claims including encumbrances. It includes covenants of seizin, freedom from encumbrance, express warranties of title, right to quiet enjoyment, ...
The legal requirement of a debtor, obligor, to pay a debt and the legal right of a creditor, obligee, to demand satisfaction of a debt or enforce payment in the event of default. ...
The accelerated cost recovery system is a depreciation system for tax purposes mandated by the Economic Recovery Tax Act of 1981. In 1986 the Accelerated Cost Recovery System (ACRS) was ...
Vertical window built through a sloping roof having its own gable and forming its own roofline. ...
A prefabricate house constructed in a factory with final assembly and erection on site. Because of economies of scale and modern factory production techniques, modular housing is ...
Suppose you wish to become a legit professional in a specific domain. In that case, you have to get a license, an official permit, or a document. A license acknowledges your studies and ...
To fulfill , complete, implement, perform, or carry out terms of an agreement including completing a signature on a contract and delivering a document to the intended party. ...
Have a question or comment?
We're here to help.