Mortgage loans are loans that are used to buy real estate and have to be paid back with interest over a set period of time. For a lender to give out a mortgage loan, they need some kind of security. This security is called "collateral," and most of the time it is the real estate property that the mortgage loan was used to buy. Since the property is kept as collateral, there is no need for any other security.
The person who gives the mortgage loan is called the mortgagee, and the person who takes out the loan is called the mortgagor. The mortgage loan agreement binds both the mortgagee and the person taking out the loan. The agreement says that the mortgagee can give the mortgagor a loan. In the agreement, the promissory note protects the mortgagee, giving them the right to the collateral and the mortgagor's promise to pay back the mortgage loan on time. In the United States, a mortgage loan usually lasts for 10, 15, 20, or 30 years.
In the United States, there are two main types of mortgage loans: those with fixed rates and those with rates that change over time. Fixed-rate mortgages have interest rates that don't change as long as the mortgage is in effect. Adjustable-rate mortgages, on the other hand, have interest rates that can go up or down based on a market index. So, fixed-rate mortgages protect the person making the loan, while adjustable-rate mortgages protect the person getting the loan. If there are fees with the monthly payments, they are added up to make a balloon mortgage loan.
Loan origination is the process of buying a loan. This is done by the mortgager and the mortgagee, and sometimes a mortgage broker is involved. The broker gets a commission from both the person who takes out the loan and the person who gets the loan. The cost of the whole mortgage goes up when a broker is involved.
When a mortgage loan is for less than 80% of the full value of a property, the mortgagee needs extra security. This is done through mortgage insurance, which is a form of insurance. The premiums for mortgage insurance are added to the monthly payments of the person who borrowed the money. But if the borrower puts down at least 20% of the purchase price, the mortgage insurance may not be needed.
There are different kinds of mortgages in the United States. The Federal Housing Administration is in charge of the most important mortgages. Loans from Fannie Mae, Freddie Mac, and Ginnie Mae are very common. The most common type of mortgage loan in the United States is a Fannie Mae mortgage.
