Explore the essentials of a first mortgage, including its primary lien status, loan types, and financial implications for borrowers.
A "first mortgage" refers to the primary loan secured by a borrower to purchase real estate. It's called a "first" mortgage because it has priority over all other liens or claims on a property in the event of default or sale.
Understanding the details of a first mortgage is crucial because it impacts one's financial stability and the ability to retain property ownership.
A first mortgage is the primary loan taken out to purchase a property and holds priority in payment in case of default. A second mortgage is an additional loan taken against the equity of the same property, which is subordinate to the first in terms of repayment priority.
A borrower's credit score significantly impacts a first mortgage's interest rate and terms. Higher credit scores typically qualify for lower interest rates and better loan conditions because they indicate lower risk to lenders.
A first mortgage is generally specific to the property for which it was obtained and cannot be transferred to another property. A homeowner must secure a new mortgage if they buy a new property. However, the original mortgage can be assumed by a buyer if the terms of the loan and lender allow for it.
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