The word loan may not be new to many of us who have been stuck at some point in our life due to inaccessibility to fund to either pursue a career in a life chosen endeavour or to finance and start a business but what I do know is that not many people has taken time out to actually understand how mortgage loan can work for them or what is required of them to access mortgage loan.
Although many people has considered mortgage loan as a debt trap or what no one should seek out for because of the extortionately high mortgage interest rate but no matter what it is to you I still believe that it is worthwhile to understand the intricacy of seeking for a mortgage loan from a hard money lender or financial institution to finance the purchase of a property or home.
Mortgage loan could be define as a legally acceptable instrument that allows you to get loan from a hard money lender, credit union or a mortgagee in order to finance the purchase of a property but it is at a mortgage interest rate and you will be required to provide an equity contribution in the investment as downpayment which is at a percentage of the total value of the property.
This sometimes is kind of advantageous to the buyer or the loan applicant in that he or she does not need to finance the real property straight out of pocket except for the equity contribution that is the downpayment to show commitment of interest of the loan applicant in the investment.
It is worthy of note that we have two instruments used in the mortgage lending process, that is the mortgage and a note. The mortgage has in it the description of the property the loan applicant is willing to purchase as well as a statement that instinctively make the financed or purchased property a collateral for the loan approved or given. The note only state in clear terms the financial term and condition for the mortgage loan agreement.
If a person or a loan applicant succeeds in securing a mortgage loan and he or she fails to meet up with his or her own part of the loan deal then the mortgagee may be forced to foreclose on the property.
There are quite a lot of prequalifying processes and requirements that must be met before a loan applicant is granted a mortgage loan by a hard money lender or financial institution. The mortgagees always must ensure that their investment in the property to be purchased is secured and will also factor in the creditworthiness of the loan applicant before considering the applicant for a mortgage loan.
The lender must first put the buyer or loan applicant through a screening exercise to qualify him or her for loan by inquiring into the applicant credit history, debt, employment and income before qualifying him or her for the mortgage loan if they meet all the requirements for loan approval.
It is also important for the mortgagee to ensure that a proper property appraisal exercise is performed by a neutral party to give an unbias assessment of the property in order to guide against over or under estimation of the price of the property.
Prior to granting of a mortgage loan the buyer or the loan applicant is expected to put pen to paper by signing the promissory note that protects the lender’s interest in the mortgage loan which also ensure the loan applicant repays the mortgage loan debt with interest.
Let me stress that the purchased property financed by a financial institution or a hard money lender could also be foreclosed on if the buyer fails in his or her obligations or duty to pay property tax as well as insure the property against fire and other home hazard.
Lest I forget before the mortgage lending process comes to close the loan applicant must pay the mortgage fee and all other associated cost with the mortgage loan such as the loan origination fee, processing fee etc and in the end the mortgagee then transfer the money to the applicant to finance the property and he or she signs the mortgage document.
Lets call it a day here today, next time we shall look at what you must know about repaying your mortgage loan.
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