The Basics of Getting a Mortgage
Mortgages are loans that allow people to buy homes or other types of real estate. The property itself serves as collateral for the loan, and borrowers typically make monthly payments that include principal and interest. The loan term can vary, but most lenders offer fixed-rate mortgages that last 30 years or less. The process of getting a mortgage can be lengthy and confusing, but understanding the basics of how mortgages work can help make it easier for homebuyers to understand what they’re getting into.
The mortgage process typically begins with a homebuyer applying to one or more mortgage lenders for a preapproval. This application requires basic financial information like income and credit score, and the lender will review those documents to determine whether the borrower is qualified for a particular mortgage amount.
Lenders also require a thorough property appraisal before issuing a mortgage, to ensure that the value of the property matches the amount of money the borrower will be paying for it. The property appraisal may also reveal any issues that could negatively affect the borrower’s ability to repay the loan, such as liens placed on the property by other creditors.
If a borrower is unable to keep up with mortgage payments, the lender has the right to foreclose on the property and take control of it. Foreclosure is a legal process that includes evicting the borrower, selling the property and using the proceeds of the sale to pay off the debt. Foreclosure can be a complicated process that can take months or even years to complete.
Most lenders offer online applications that make the mortgage process easier for borrowers, but some also have local branches where they can answer questions in person. PNC, for example, offers both online and in-person support, and it has a mobile app to help borrowers track the status of their mortgage application.
A mortgage is an agreement, usually documented in a deed of trust, between two parties: the borrower and the lender. The deed of trust grants the lender the right to seize the property if the borrower fails to pay back the borrowed funds plus interest.
Mortgages are an essential tool for aspiring homeowners, but the financial commitment is substantial. To help borrowers understand what they’re getting into, it’s important to read mortgage terms carefully and find a lender that can provide clear explanations of its products and services.
A mortgage payment is typically made up of four parts: loan principal, interest, taxes and insurance. While it may seem overwhelming to keep track of so many different bills and due dates, some lenders offer escrow accounts to manage these expenses, which makes it easier for borrowers to stay on top of their repayment obligations. Borrowers should also pay attention to their lender’s annual percentage rate (APR) when shopping for a mortgage, as this number combines interest rates with other fees and points to give a more accurate picture of the total cost of borrowing.