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Before applying for a Mortgage Loan Home in Florida, is good to know some facts about Mortgage Loan, so you can buy your home avoiding misleading situations. Let's start!

What is Mortgage?

A mortgage is a device used to create a lien on real estate by contract. The mortgage is an instrument that the borrower (called the mortgagor) uses to pledge real property to the lender (called the mortgagee) as security for a debt, also called hypothecation.

The mortgage instrument contains two parts:

  • the mortgage, which is the pledge
  • the note, which is the actual evidence of the debt and promise to repay (sometimes called a promissory note).

To protect the lender, a mortgage is recorded in the public records creating a lien (when there are multiple liens, order of recording determines priority).

History of Mortgage Loan

At common law, a mortgage was a conveyance that on its face was absolute and conveyed a fee simple estate, but which was in fact conditional, and would be of no effect if certain conditions were met --- usually, but not necessarily, the payment of a debt by the original landowner. Hence the word "mortgage," Law French for "dead pledge;" that is, it was absolute in form and in theory required no further steps to be taken by the creditor.

In many U. S. states, however, a mortgage has been converted by statute to a device for creating a security interest in land. When the landowner fails to perform on the obligation secured by the mortgage, the mortgage holder must file a foreclosure to cause the property to be sold at auction, usually by the sheriff. Since mortgage debt is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real property to make certain that the lien of the mortgage is prior to anyone else's claim.

Mortgage Finance Industry

Mortgage lending is a major category of the business of finance in the United States of America. Mortgages are commercial paper and can be conveyed and assigned freely to other holders. In the USA the Home Owners Loan Corporation, the Federal Housing Administration administer the programmes colloquially known as "Ginnie Mae" and "Freddie Mac" (aka the GSE's—the government sponsored enterprises) to foster mortgage lending and thus to encourage home ownership and construction.

Pre-qualification For a Mortgage Loan Home

Pre-qualification means that a loan officer has taken some information from the borrower, but not verified any of it. With a pre-qualification, the borrower typically has not stated their social security number, so it is not possible to check credit. A borrower will give their employment, income and asset information and the amount of current monthly debt. In addition a borrower is asked about their general credit worthiness. Based on this quick work up the borrower will be told that they pre-qualify for a certain loan amount. For example, if the borrower makes $15/h or $2600/month this is then calculated to an industry-standard 36% debt to income. So if a borrower makes $2600/month they would be pre-qualified at a total debt of $936 (this includes any monthly payments, including car & credit card min. amount; along with the proposed housing payment of principal, interest, taxes and insurance)

Mortgage Loan Types

There are many types of mortgage loans. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM).

In a FRM, the interest rate, and hence monthly payment, remains fixed for the life (or term) of the loan. In the US, the term is usually for 10, 15, 20, or 30 years. In the UK the fixed term can be as short as five years, after which the loan reverts to a variable rate.

In an ARM, the interest rate will periodically (annually or even monthly) adjust up or down to some market index. Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where unpredictable interest rates make fixed rate loans difficult to obtain. Since the risk is transferred, lenders will usually make the initial interest rate of the ARM's note anywhere from 0.5% to 2% lower than the average 30-year fixed rate.

A partial amortization or balloon loan is similar to a FRM, but the balance is due at some point short of the full term.

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Florida Mortgage Resources

Understanding Mortgage Terms
How much mortgage you can afford
Mortgage Loan
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What is a Reverse Mortgage
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What is Foreclosure?
Foreclosures in Florida

Real Estate Law Firm
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See Also:

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