Mortgages are loans used to buy homes or property with the property serving as collateral, and lenders can foreclose if payments stop. Monthly mortgage payments typically include principal, interest, property taxes, and insurance, and may include private mortgage insurance (PMI). Key parties in the mortgage process include the borrower, lender, mortgage servicer, appraiser, title company, and closing agent or escrow officer. Appraisers set fair market value and title companies ensure clear ownership transfer. Closing agents oversee document signing and fund distribution. Down payments commonly range from 3% to 20% of the home price, and interest rates determine borrowing cost.
What is a mortgage? A mortgage is a loan used to buy a home or property, with the home itself serving as collateral. If you stop making payments, the lender can foreclose to recover their money. How does a mortgage work? Principal: the portion that reduces your loan balance. Interest: the cost of borrowing money, based on your interest rate. Taxes: property taxes collected by your local government. Insurance: homeowners insurance, and sometimes private mortgage insurance (PMI).
Borrower: The individual (or individuals) taking out the loan to buy the property. Lender: The financial institution, bank, or mortgage company that provides the loan. Mortgage servicer: Sometimes different from the lender, this is the company you send your monthly payments to. They handle billing, escrow accounts, and customer service.
Each of these parties plays a role in making sure the loan is valid, the property is secure as collateral, and the transfer of ownership goes smoothly. Key mortgage terms explained Down payment: The upfront money you pay, typically 3%-20% of the home price. Interest rate: The percenta
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