What is a Mortgagor
Let me explain what a mortgagor is: if you're borrowing money from a lender to buy a home or other real estate, you are the mortgagor. You can get mortgage loans with different terms depending on your credit profile and the collateral you offer. In this setup, you have to pledge the title to the real property as security for the loan.
This differs from the mortgagee, which is the lender providing the money so you can purchase that real estate.
Key Takeaways
- You, as the mortgagor, are the person or entity getting the mortgage loan to buy property.
- Before you get the loan, you need to complete an application and get approved by the lender's underwriters.
- Once the loan is funded, you're responsible for making on-time payments of interest and principal; if you don't, you could face foreclosure on the home.
Understanding Mortgagors
As a mortgagor, you can secure different mortgage loan terms based on the underwriting factors tied to your loan. Remember, mortgage loans are secured, so they all involve pledging real estate as collateral.
In the loan, you're the one receiving the funds, while the mortgagee is the one offering them. You submit a credit application and, if approved, agree to the terms. The mortgagee sets those terms, handles loan servicing, and manages the title rights to the collateral.
Applying for a Mortgage Loan
When you apply for a mortgage, it's like other loans: terms depend on your credit application and the lender's standards. Underwriting looks at your credit score, history, and debt-to-income levels. But unlike other loans, it also examines your housing expense ratio closely. Underwriters review these to decide if you qualify.
Lenders vary in their requirements, but traditional ones often want a credit score of 620 or higher, a debt-to-income of 36%, and a housing expense ratio of 28%. That ratio includes your monthly mortgage payment and can differ by lender.
Mortgage Loan Contract Obligations
If you're approved as a mortgagor, you must agree to the mortgagee's terms to close the deal. The contract covers your interest rate and loan duration. You need to make monthly principal and interest payments to stay in good standing.
Contracts also include rules on title ownership and the lien on the property as collateral. These outline what happens if you miss payments, including how many delinquencies are allowed before the lender can act on the lien and seize the property in default. Terms can vary on these points.
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