Mortgage – seems pretty simple right? Most people know that the mortgage is the loan or monthly payment you fork over to the bank in order to live in your home. Sooner or later, you pay it off either by owning the home for a long time, or selling the house; in which the payment from the new buyer pays off your old loan.
But it wouldn’t be a Word of The Week if we didn’t delve a little deeper into this strange term. So let’s get to it!
First the definition:
Mortgage – A pledge of property as security for the repayment of a loan.
So really, you could mortgage something besides your house. Mortgage really just means you’re leveraging something else for a loan/money.
In our day, The Mortgage means the loan amount, or sometimes even monthly payments we give to the bank. How many times have you heard “Gotta pay The Mortgage” or “How much is my Mortgage gonna be?” You may have also have heard “I’m gonna have to mortgage the car, in order to pay for that!” So it can be either a noun or verb, depending on the use.
Gotta Pay The Mortgage”
Ever wonder where we get this funky word for a loan on a house?? Well, I won’t bore you with too much of a history lesson but here’s the basics:
The word has German and French backgrounds, coming from the French word “Mort” which means “Death” and the Germanic word “Gage” which meant “Pledge”. What it meant was that when the pledge was fulfilled (the loan is payed off) then the agreement is dead. That’s pretty close to what it still means today, however I find it pretty ironic that “death” is in the word, because the mortgage can feel like it’s slowly killing you sometimes. Just a little home-owner humor.
When you apply for a Mortgage in the current financial climate, a couple things happen.
- First, a lender will look at your ability to borrow and pay back money. This is what credit scores are used for, and they will also verify your other assets, income, and debts to determine what kind of loan you’ll be able to get.
- Second, once you make an offer on a home, you will contact the lender and they will start the official loan underwriting and origination process. This can be a little complicated, so make sure you work with a good lender who answers all your questions and finds the best option for you. During this stage, they will order an appraisal which compares the price and loan you’re looking to get, against other sold homes in the neighborhood. This ensures that you don’t pay too much, and that they don’t lend you too much money for the home’s value. Within this, you get your monthly payment amount, which has several factors built in.
If everything checks out, you get to close and become a home owner! Pretty cool, huh?
I should also note that there are many different types of Mortgages out there to choose from. Conventional, FHA, VA (Military Veterans), Adjustable Rate Mortgage (called an ARM), Carry Backs, Interest Only, and Reverse Mortgage just to name a few.
As a first time buyer in MN, you may have more options than other buyers, so go over your eligibility very carefully with your lender.