When thinking about purchasing a new home, the price tag is intimidating. For many, paying for a living space with cash or up front is not an option. However, with a mortgage, buying real estate seems much more realistic.
A mortgage is a loan (plus interest) used to purchase any kind of real estate, like houses or land. There are many different types of mortgage loans, including fixed-rate, adjustable-rate, interest-only, and reverse mortgages/loans.
Applying for a mortgage can happen before or after choosing their new property. If applicants search for new real estate with a pre-approved mortgage, this allows for more security during the process.
When applying for a mortgage at a mortgage lender(s), applicants will be required to present evidence of economic stability. That way, the mortgage lender knows that the applicant is capable of paying back the money loaned. This evidence may be provided in forms of bank and investment statements, tax returns, proof of employment, and a credit check.
If the evidence proves sufficient, then the lender will suggest a loan amount (like a percentage of the real estate’s total price) and interest rate depending on the property. If both the lender and the applicant agree, the deal is done. This is called a closing, and the applicant will be asked for a down payment. Until the loan is paid back to the lender in full, the lender owns the property.
Works Cited
“How Does a Mortgage Work?:” LendingTree, www.lendingtree.com/home/mortgage/how-does-a-mortgage-work/. Accessed 31 Aug. 2023.
Kagan, Julia. “What Is a Mortgage? Types, How They Work, and Examples.” Investopedia, Investopedia, www.investopedia.com/terms/m/mortgage.asp#toc-what-is-a-mortgage. Accessed 31 Aug. 2023.
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