What Is A Mortgage?
A mortgage is an interest in land which provides security for the payment of a debt. Some states apply the common law rule that the conveyance of real property is void and is defeasible should the "owner" fail to make the payment. Many states recognize a mortgage as a mere lien (without conveying an interest in the land other than security or lien) and some states have adopted hybrid approaches.
The types of mortgages that are typically available to prospective homebuyers are:
- Conventional: With a conventional mortgage, the lender obtains a lien or defeasible legal title to the property in return for the payment of the amount of money lent.
- FHA Mortgage: An FHA mortgage is a conventional mortgage which is insured in whole or in part by the Federal Housing Authority.
- Purchase Money Mortgage: A purchase money mortgage is one that is given to secure the loan which is used to buy the property. A first (senior) mortgage on the property has priority over any second or subsequent (junior) mortgages on the property.
- Adjustable Rate Mortgage: An adjustable rate mortgage (often called an "ARM") offers a fixed initial interest rate and a fixed initial monthly payment. After the initial period is over, the rate and term of the mortgage can be modified at predetermined times under the agreement to reflect the current market mortgage rates.
There are several other mortgage options, such as balloon mortgages, shared-equity mortgages, biweekly mortgages, reverse mortgages, and buy downs.
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