Ali Ata on Buying a Property: The Mortgage Process

Businesses and individuals use mortgages to buy a property without paying the entire price upfront. The borrower has to repay the loan plus interest over a specified number of years until the property is paid in full. Most mortgages are fully amortized. It means that the amount you regularly pay will stay the same, but different portions of principal vs. interest will be paid during the life of the loan with each payment. Most mortgage terms are for 15 or 30 years.

Ali Ata says that mortgages are also known as claims on property or liens against property. The property can be foreclosed if the borrower can't pay the mortgage.

The Mortgage Process

Would-be borrowers start the process by applying to mortgage lenders. Lenders will ask for evidence that the borrower can repay the loan. It may include bank statements, recent tax returns, proof of current employment, and investment statements. Most lenders will run a credit check, adds Ali Ata.

If the borrower's application is approved, the lender will offer a specified loan amount at a particular interest rate. Homebuyers usually apply for a mortgage after they have chosen a property, but they can also apply while they are still shopping for one, says Ali Ata. It is a process known as pre-approval. Pre-approval gives buyers an edge in a tough housing market because property sellers will know they have enough money to back their offer up.

Once a seller and a buyer agree on the terms of the deal, they or their representatives will meet at a closing. Ali Ata explains that this is when the borrower makes their down payment. The seller will receive the agreed-upon sum of money and transfer ownership of the property to the buyer. Ali Ata adds that the lender may charge some fees for originating the loan at the closing.

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