A mortgage is defined as a conditional conveyance of property as security for the repayment of a loan. The mortgage provides security to the lender by using the property as collateral in the event of the borrower defaulting on the loan. The borrower takes possession of the property and agrees to make payments according to the conditions set forth by the lender. If the borrower fails to meet these conditions, the lender can foreclose on the property.

Mortgages are the way that most people in the United States buy property. Because of the recent credit crunch, getting a mortgage in today's world can be a difficult proposition. A borrower will need to have excellent credit, a credit score above 620 is a big help, as well as a sizable down payment, 20% would not hurt your cause. A 1st time home buyer may be eligible for a down payment assistance program, but you will have to meet certain criteria, such as residing at the property for a specified period of time, and those programs are becoming more difficult to find.

Where to get a Mortgage?

There are basically two places you can get a mortgage from. A mortgage broker acts as an intermediary between a lending institution and a borrower. They are licensed professionals who are responsible for dispensing appropriate advice to the borrower. They review the borrowers circumstances, and recommend a mortgage product that best suits their needs. At a bank you will be dealing with a loan officer who will present the borrower with the products offered by their financial institution. Loan officers work under the license of that institution. It will be up to the borrower to choose the right mortgage for themselves. both a mortgage broker and a loan officer have legal obligations to fully disclose loan terms.

Fixed or Variable

Your next decision is to choose which type of mortgage is right for you. A fixed rate mortgage has a set interest rate throughout the life of the loan. This type of loan is popular because you will know exactly what your payment will be, but initially you may have to pay a higher interest rate. An adjustable rate mortgage (ARM) is a mortgage loan with a variable interest rate. These are good if you want lower initial payments, however after the initial term is expired the interest rates can rise dramatically. These mortgages are a good fit if you are only going to be in the property for a short period of time.

Closing Costs

In addition to a down payment, there are additional costs associated with buying a home. You will need to do a title search to ensure that there are no outstanding leins or encumbrances on the property. You will have to pay for an appraisal to determine that the sale price of the property is a fair market value, and for a survey to confirm the lot size, and make sure there are no encroachments. You will have to pay for a licensed home inspector to ensure the structure has no serious defects such as a leaky roof. You will need to purchase a home owners insurance policy to cover the property from a catastrophe, and if you have less than a 20 % down payment, you will need to buy Private Mortgage Insurance. You will need to hire a real estate attorney who will represent your interests during the entire process, but especially at the closing. The lending institution may also charge points, or pre-paid interest, which one point would equal one percent of the loan principal. The local government, typically the county clerk will also charge a recording fee to record the change in ownership of the property.