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What Is a Mortgage?

May 31, 2024
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Thinking of buying a home? You’ll likely need a mortgage.

If you are looking to buy or build a home in Maryland, you are entering into a financial process with many terms you might not know yet. Unless you are purchasing real estate with cash, you will likely be getting a mortgage to make your purchase. What is a mortgage? Let’s take a look at this type of loan so you can be on your way to getting your next home!

Where Does the Term “Mortgage” Originate?

The term “mortgage” derives from the Old French “morgage,” which is a word for “death pledge.” The loan either dies when the debtor fully pays it or the debtor fails to pay it. The word “mortgage” uses the Latin for “death,” adding the “t.”

What Is a Mortgage?

As mentioned above, a mortgage is a loan. Specifically, it is a loan for any purchase of real estate, like land, a house, or commercial property. One can get a mortgage from a bank, credit union, or another lender. 

The borrower pays back the loan through a monthly payment, which comes in two parts: principal and interest. The principal is the property’s cost, but the interest is an added percentage charged by the lender for giving you the loan.

The Property as Collateral

If the borrower fails to pay the loan, the property itself is used as collateral, a repayment for the lost loan. The lender has the right to foreclose on the property and take it back if the borrower fails to pay.

Mortgage as a Lien

While the mortgage is “alive,” the borrower has a legal claim to the property. No one else can take it. This legal claim is called a lien.

Types of Mortgages

Types of mortgages include 30-year, 15-year, and 5-year mortgages, and fixed and variable-rate mortgages. You can decide what your mortgage timeline and monthly payment will be. Fixed-rate mortgages lock you into a fixed interest rate, while variable-rate mortgage interest rates depend on the current market.

There are all kinds of mortgages for all kinds of properties and loan types. At Ameri-Star Homes, you can take on a construction-to-permanent loan for building a new construction home.

Qualifying for a Mortgage

Mortgages are large loans, so lenders want to ensure that borrowers can really pay them off. Your income, debt-to-income ratio, and credit score help determine how much you can afford. If you are ready to look into qualifying for a new construction home, Ameri-Star Homes can help you out in Maryland!

Let Ameri-Star Homes Build Your New Custom Home!

Ameri-Star Homes was built on the idea that a home is not complete until the homeowner is 100% satisfied. That’s right, completely satisfied homeowners. Whether you want a home built on one of our home sites or on your own land, count on the same high quality from Ameri-Star. We have set out to exceed all your expectations of integrity, affordability, and customer satisfaction. Build lasting memories for years to come with Ameri-Star Homes. 

For more information, contact us today at 410-590-1000 or through our contact page. For more helpful custom home tips, keep in touch with us through Facebook, Twitter, LinkedIn, and Pinterest!