Module 1: Mortgage Lending Overview and Terms

Mortgage Definition

A mortgage is a type of loan that is used to purchase a property. The property serves as collateral for the loan, which means that if the borrower fails to make payments, the lender has the right to seize the property.

Mortgage Lending Overview

Mortgage lending is the process of providing loans to individuals or businesses to purchase or refinance a property, with that underlying property serving as collateral. Mortgage lenders evaluate the borrower's creditworthiness, income, and other factors to determine whether to approve the loan.

Residential mortgage lending involves providing loans to individuals to purchase or refinance a home or other residential property. The loans are typically for a term of 15-30 years and may be fixed-rate or adjustable-rate. In the case of fixed-rate mortgages, the interest rate remains the same for the life of the loan, while in adjustable-rate mortgages, the interest rate can change over time. Residential mortgage lending is heavily regulated, and lenders must comply with a range of federal and state laws and regulations.

To qualify for a residential mortgage loan, borrowers must typically have a good credit score, a stable income, and a down payment of at least 3-20% of the purchase price. The lender will also assess the borrower's debt-to-income ratio, which is the amount of debt the borrower has compared to their income.

Commercial mortgage lending involves providing loans to businesses to purchase or refinance commercial properties such as office buildings, retail centers, and apartment buildings. The loans are typically for a term of 5-20 years and may be fixed-rate or adjustable-rate. In some cases, commercial mortgage loans may have a balloon payment at the end of the term, which means that the borrower must pay off the remaining balance in full.