Mortgage Loans

A mortgage is a device used to create a lien on realThis information might contain the following: credit card
estate by contract. The mortgage is an instrument thatbills, consumer debt bills, information about alimonies (if
the borrower (called the mortgagor) uses to pledgeapplicable) and some other. Lenders usually interested
real property to the lender (called the mortgagee) asin the origin of the future down payments (will the
security for a debt, also called hypothecation. Theborrower pay them from the salary or interest from
mortgage, as a rule, consists of the promissory notesome equity etc). Additional personal information can
and the pledge.include divorce decree or explanation letters about any
A mortgage is a device used to create a lien on realcredit problems. Of course, the list of the required
estate by contract. The mortgage is an instrument thatdocuments may very different from one lender to
the borrower (called the mortgagor) uses to pledgeanother and it will be wisely to make them more
real property to the lender (called the mortgagee) asprecise by the means of communications beforehand.
security for a debt, also called hypothecation. TheBut borrowers should take into consideration that fact
mortgage, as a rule, consists of the promissory notethat different types of mortgage imply specific
and the pledge. For example, when somebody wantsrequirements (for example, reverse mortgage requires
to buy a house to live in it with his family, but does notthe borrower to be at least sixty-two years old). I also
have enough money at the moment. Thus that personwant to mention that there is a kind of mortgage when
needs to take a credit. But nobody will give this personno or very little documents are required to be
such a large sum of money, without havingpresented except for income and losses, but it can be
trustworthy and firm guarantees. But what kind ofgiven only to self-employed borrowers.
guarantee can meet these criteria? Of course it is notWhen the lender processes and analyses the
a word of honour or just a promissory note. But theinformation about the borrower, he determines the size
house, which a person wants to buy, will probably beof the loan, which he can give to the borrower. This
the best guarantee for the creditors.size depends on the borrower's ability to repay the
Consequently, the person, who needs a credit, writes adebt. When the borrower knows the amount of the
promissory note, which serves as the evidence of thepossible loan he or she can negotiate the terms of the
debt and the promise to repay money with a certainmortgage and its type (main types of the mortgage
interest rate, and formalizes a lien. This lien must bewere described above). Then it comes time to open
registered in the public records. After the repaymentescrow, provide title report, credit report and the
of the debt within a certain period of time, creditorappraisal of the property - in other words, to form
returns the promissory note to the debtor and the lienmortgage package and send it to the lender, which
becomes annulled. In the case when the debtor canwould finally determine to give a loan to the borrower
not fulfill his engagements, the pledge (the house in ouror not.
example) will be sold by the auction and the proceedsIf the loan is approved by the lender, it is time to sign all
pass into the hands of the creditor.the documents (with the signing agent of course) and
Sometimes there occur such conditions, when adeliver them to the lender. The lender reviews the
creditor needs money with expedition and the credit'sdocument once more and funds the loan, then all
maturity date is too late. In that case the creditor cannecessary records are made and the loan closes.
resell the lien to other holder, which will receive theMortgage loan implies different additional fees for the
interest rate and the credit. This kind of financing isborrower (or the lender, which is very seldom, but it
very popular in the United States of America anddepends on the prior negotiations) among of which
there exists two governmental organizations - Homethere may be the following: discount fee (this fee
Owners Loan Corporation and Federal Housingusually reduces interest on the pro rata basis), loan
Administration, which provide mortgage loans with veryorigination fee (it is the compensation for the lender
law interest rates and of course there are plenty ofbecause of his operation costs for organizing the
private loan companies, mortgage companies, creditmortgage), application fee (it is usually paid when the
unions etc. There are many types of mortgage loansborrower competes the application form for the debt),
exist: adjustable rate mortgage, fixed rate mortgage,appraisal fee (this fee increases directly on the pro
capped rate mortgage, discounted rate mortgage,rata basis with the price of the house; it is paid for the
reverse mortgage and other.independent appraisal of the house, which lender
Adjustable rate mortgage is characterized by thewants to know in order to assess how much money
changing interest rate. Thus "the borrower benefits ifhe can lend you; "Factors to be considered in
the interest rate falls and loses out if interest ratesdetermining market value of the property are: present
rise".cash value; use; location; replacement value of
Fixed rate mortgage is characterized by the constantimprovements; condition; income from property; net
interest rate and, in turn, constant monthly payments.proceeds if the property is sold, etc"; moreover,
Capped rate mortgage is the mortgage when thelenders usually suggest a mortgage which not
borrower pays the accrued interest with a constantexceeds ninety five percent of the assessed
rate, but if the actual rate falls below the capped rate,property), credit report fee (this fee is paid for the
then the borrower pays on the lower rate.independent assessment of the borrower's solvency),
Discounted rate mortgage is a mortgage when thetitle search and insurance fee (these costs are related
borrower repays the loan with the discounted interestto the investigation of the property's history), flood
rate for a certain period of time.certification costs (related to the investigation if the
Reverse mortgage is a kind of loan, when old peopleproperty is not situated in the flood zone and if it is so
want to receive money while living in their homes.than it implies flood insurance costs), survey fee,
When the borrower dies his property is sold and thepaperwork fee, costs of attorneys, real property taxes
credit is repaid from the proceeds.(regulated by the state law), escrow account costs
In order to obtain a mortgage a person should fill a loan(lenders often require borrower to create such
application and prepare all the required by the lenderaccount as a guarantee that the borrower pays
documents (see below), and then deliver them to theinsurance fees and taxes on the real estate in time, in
lender. Within three days the lender has to return theorder not to lose his pledge; usually governmental loan
disclosures, required by the law - Good Faith Estimatecompanies require an escrow account, private
and Truth in Lending, to the borrower.companies may not require it) and some others
Commonly, lenders demand for the followingdepending on the situation. In this part there also must
documents to be presented by the borrowers: -be mentioned, that most lenders require an immediate
verification of income; - verification of assets; -down payment at the certain rate of the purchase
information about the purchase; - information about theprice (different lenders require different down
debts; - some kinds of additional personal information.payments - from three up to thirty percent; low down
Verification of income includes the following: earningpayment percentage are stipulated by the private
statements for the two past years; profit and lossesmortgage insurance).
from the self-employment (if applicable) for the pastDuring the process of obtaining the mortgage loan
three years; additional income (if applicable) such asthere are also needed signing agent's services. This
interest or social security. Verification of assetsneed is stipulated by the following circumstances: both
includes the following: list of bank accounts numbers, listthe lender and the borrower need to ascertain that
of saving bonds and some other. Information about thethey have a deal with the right people, they want to
purchase - anything that may be considered importantascertain that the documents are accurate enough,
from the point of view of the lender - copies of thethat all the necessary procedures are performed in the
purchase agreement and the sale agreement,appropriate way, that all the essential signatures and
because he is concerned a lot if the borrower is not adates are made in the appropriate way and that all the
swindler. Information about the debts is importantdocuments notarized correspondingly. But as it was
because in the case of borrower's bankruptcy therealready stated above, the loan signing agent must not
can occur the line of his creditors each of which has agive any legal advice or comments.
legal priority to receive debts.