Definition: The term "mortgage" refers to a loan made by an individual or institution, typically for the purpose of purchasing property, such as a house, in order to own that property permanently and avoid making regular payments on it each month. In general, a mortgage involves several stages: 1. Application: The borrower applies for a mortgage through their lender (often a bank or other financial institution). 2. Approval: Depending on the circumstances of the loan application, lenders may require additional documentation such as proof of income or employment history. 3. Prequalification: This is when a lender evaluates the borrower's creditworthiness and determines whether they are eligible for a mortgage. 4. Close: Once approved, the pre-approval letter is sent to the borrower, allowing them to make an offer on their property without additional documentation. 5. Negotiation: If the borrower agrees to the terms of the loan, negotiations typically begin between the lender and the borrower. 6. Closing: This final step occurs when the loan is officially documented by the lender and the borrower signs all necessary documents. The term "mortgage" has a long history in finance and has evolved over time with advancements in technology. In more recent years, mortgage loans have become more complex and flexible, allowing for different types of debt arrangements such as adjustable-rate mortgages (ARMs), fixed-rate mortgages, and jumbo mortgages. In summary, the term "mortgage" refers to a loan that is made by an individual or institution to purchase property permanently. It involves several stages, including application, approval, prequalification, close, negotiation, closing, and documentation.
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