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