A mortgage is a loan from the bank or another financial institution that enables the borrowers to purchase a home without all of their money being used in the transaction.
Who Qualifies for a mortgage?
To qualify for a mortgage the borrower must be at least 18 years old, with a reliable two-year work history and a credit score of at least 580. Another thing the borrower must keep in mind is that they must have money saved for a down payment and closing costs. If the buyer is obtaining an FHA loan, they must have at least 3.5% of the loan amount saved, and if obtaining a conventional loan they must have anywhere between 3%-25% of the loan amount saved. Closing cost is also about 2%-5% of the loan.
For example: if the property’s FHA loan amount is $350,000, with 3.5% down payment and closing costs of 3%, the buyer must have saved $12,250 for down payment and $10,500 closing cost. This is a total of $22,750.
A mortgage is a type of loan designed solely for the purpose of purchasing a property. When you take out a mortgage, the lender provides you with a set amount you qualify for to purchase the property, which you agree to pay off through the years, along with interest. Once the loan is completely paid off, the home belongs completely to the borrower, and the bank is no longer involved.