A mortgage is a type of loan specifically for purchasing real estate. When you get a mortgage, the bank or lender loans you money to buy a home, and the property itself serves as collateral. This means that if you don’t make your payments, the bank has the legal right to take possession of the property.

How Mortgages Work & Mortgage Application Process

Pre-Approval: Before you start looking for a home, you can apply for pre-approval from a bank. The bank assesses your income, credit score, and debt-to-income ratio to determine how much they are willing to lend you. This gives you an idea of what price range of homes you can afford Home Search: Once pre-approved, you can search for a property within your approved price range. Mortgage Applications: After you find a home, you’ll apply for the mortgage officially. The bank will review your financial situation in detail, including income verification, employment history, credit score, and down payment amount.