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
The meaning of plot refers to a parcel or a small lot. A plot is essential in determining the land cost. Additionally, it defines a diagram or schematic drawing of a building or piece of ...
Corporation having only one person, A corporation sole is primarily used for the purposes of a nonprofit ecclesiastic church related organization. Ina church, the corporation sole is headed ...
To secure a listing by a real estate agent for a certain parcel of property. For example, a real estate broker wishes to list as many properties a possible to built an inventory of future ...
Charge assessed a mortgagor by the mortgagee when assuming a pre-existing mortgage. The assumption fee is often included in the closing costs when purchasing property. ...
Percentage of rentals estimated not to be made because of actual and anticipated vacancies. ...
Retail businesses in the same locality having a parking lot servicing them. The center may contain a department store, small retailers, and restaurants. There may also be a movie theater. ...
Value of agricultural land as determined by its ability to produce crops and livestock. ...
Same as term Veterans Administration Mortgage: Mortgage guaranteed up to 30 years by the Veterans Administration to veterans meeting minimum requirements. Originally established by the ...
An entrance hallway from the outside of a building. Foyers are intended as a gathering place for people either before exiting or upon entrance. ...
Have a question or comment?
We're here to help.