What is Mortgage and How Does it Work?
Like many other loans, Mortgage is also a kind of a loan which is provided by the bank or a lender by collecting a collateral to secure loan according to the loan amount.
A mortgage is a loan given specifically to buy a property in which property or real estate is used as collateral to secure the loan amount. In Mortage, the loan borrower promises the lender to pay back the funds within a certain time frame for a certain cost (Interest). The lender is the one who owns the property collateral until the borrower completely returns the loan amount with interest.
How to Apply For Mortgage?
Applying for Mortgage can be a very difficult task for some time until you complete all the necessary formalities and accept all the terms and conditions asked by the lender.
- W-2s, pay stubs, proof of employment and two years worth of income.
- Bank information including name, address, account numbers, and three months of statements.
- Debt currently owed, including amounts due and account numbers.
- Tax returns and balance sheets for the self-employed.
- Three months of bank investment statements.
After submitting all your documents, it depends on the lender that your loan will be approved or not.
Your Lender May Review Your Mortgage Application Considering the Amount You Want to Borrow
- Employer’s name, address, borrower’s job title, time on the job, bonuses, average overtime, salary, and students may be required to provide transcripts.
- If there are gaps in employment history, there must be a written explanation.
- A VOE or Verification of Employment form may be sent to the current employer.
- Two years of W-2 forms and most recent paycheck stubs.
- For the self-employed, financial statements for two years and all tax forms must be provided, including a profit and loss statement for the current year.
What if the Borrower isn't Able to Pay Back the Mortgage Later On?
As we've already mentioned before that the lender is the one who owns the property collateral until the borrower completely returns the loan amount with interest. So the mortgage is legally binding and secures the agreement in giving the lender the right to have a legal claim against the borrower’s home if the borrower defaults on the terms of the agreement.
The Closing of the Mortgage Agreement
The closing of the Mortgage Agreement is the final step of the agreement in which All parties sign the necessary papers and officially seal the deal. Ownership of the property is transferred to the buyer.
Where to Apply For Mortgage Loan?
- Online Lenders
- Mortgage Brokers
Mortgages make bigger buys feasible for people sufficiently lacking money to buy a property. Moneylenders go for this risk, making these loans as there is no certification the borrower will have the capacity to pay later on. Borrowers go out on a limb of tolerating these credits, as a failure to pay will result in a total loss of the collateral.
In Mortgage loans, you've both, advantages and disadvantages. So be wise while making your mind for buying a mortgage loan. Please share this article if you liked it.
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