A mortgage is a loan that consumers use to finance the purchase of a home. Unlike other forms of loans, mortgages allow people to pay off the money they borrow with interest over a fixed period, or term.
How do mortgages work?
Banks and other traditional lenders Top Rankin Mortgages offer mortgages, but online-only lending options are also available. Understanding how mortgages work can help you choose the right one for your needs and budget.
Applying for a mortgage is a lengthy process. It involves gathering a lot of documents, including proof of income, a list of assets and debts, and personal data for credit inquiries. It also requires explanations of any financial gifts you receive to purchase a home, such as assistance from family members or friends.
Once you’ve submitted your paperwork, your lender will start a process called underwriting. During underwriting, the lender reviews all your information to ensure it’s accurate.
Then, the lender will determine if you qualify for the loan and the amount you can borrow. The underwriter will take a close look at your credit score, debts and assets to see how likely you are to repay the loan.
Once you’re approved, you can begin looking for a house. During this process, you’ll need to pay for items like home insurance and title insurance. Other expenses include document recording fees and a property appraisal. You’ll also need a down payment on the mortgage.