Who is a Mortgagor?
A mortgagor is an individual or entity that borrows money from a lender to purchase a home or other type of real estate. The terms of the mortgage loan vary based on the borrower’s credit profile and collateral. To secure the loan, the mortgagor must pledge the title of the real property as collateral.
In contrast, a mortgagee is the entity that lends money to the borrower for purchasing real estate.
Key Takeaways
- A mortgagor is the person or entity receiving a mortgage loan to buy property.
- Before obtaining a loan, a mortgagor must complete an application and get approval from the lender’s underwriters.
- After the loan is funded, the mortgagor must make timely payments of interest and principal, failing which can lead to foreclosure.
Understanding Mortgagors
Mortgagors acquire varying mortgage loan terms based on underwriting factors associated with the mortgage loan. Regardless of the specific terms, all mortgage loans share the commonality of requiring real estate collateral.
The mortgagor is the party receiving the loan, while the mortgagee is the party offering the loan. The mortgagor needs to submit a credit application and agree to the loan terms if approved. The mortgagee determines the mortgage loan terms, oversees its servicing, and manages the title rights to the real estate collateral.
Applying for a Mortgage Loan
When applying for a mortgage loan, the terms are based on the borrower’s credit application and the lender’s underwriting standards. Underwriting will assess • credit score
- credit history
- debt-to-income levels
- borrower’s housing expense ratio.
Traditional lenders generally require:
- A credit score of 620 or higher
- A debt-to-income level of 36%
- Housing expense ratio of 28%
~Housing expenses, mainly the monthly mortgage payment, are included in the housing expense ratio and may vary by lender.
Mortgage Loan Contract Obligations
Once approved, mortgagors must agree to the mortgagee’s terms to finalize the deal. The contract includes the interest rate and loan duration, and requires the mortgagor to make monthly principal and interest payments to maintain the loan in good standing. Contracts also cover title ownership and the lien on the real estate as collateral. Missing payments could trigger provisions that allow the lender to take action against the property.
Related Terms: mortgagee, secured loan, credit application, lien, housing expense ratio.
References
- Experian. “What Credit Score Do I Need to Get a Mortgage?”.
- Better. “What Are Qualifying Ratios and How Do Mortgage Lenders Use Them?”.
