What is a mortgage loan
A mortgage loan is a loan with a lien on real estate so that the lender has collateral until the loan is repaid. On any given date, the borrower is liable for the unpaid principal balance plus any accrued interest expense up to that point. It is common for mortgage loans to require monthly interest and principal payments that will repay the principal balance over a number of years.
In plain English, a mortgage is a loan. For many people, it’s the biggest loan they will ever borrow. With a regular loan, there’s no explicit collateral. The lender looks at your credit history, your income and your savings, and determines if you’re a good risk. With a mortgage, the collateral for the loan is the house itself. In case you fail to pay back the loan amount along with interest associated with it, then the lender can legally take possession of your house.
Where to get Mortgage Loans
Here are the main places you can get a mortgage:
- Banks: This can be a great place to start if you have an institution you work with that already knows you and your finances. That said, banks typically have only a few loan options so it’s smart to talk with your banker, and then compare the programs with a couple more options before settling on one.
- Nonbank lenders: These companies are often willing to work with borrowers that banks avoid due to their riskier profile. If you have a poor credit history or some other blemish in your financial past, you may have better luck landing a loan with nonbank lenders, which now provide more than half of all loans.
Mortgage brokers: They are specialized advisors who make a greater variety of options available to find a loan that’s right for you. They often work in collaboration with numerous with many different lenders so they can help identify different rates and programs based on your specific situation.
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