Mortgagor: A Definition

If you plan to finance a home purchase with a mortgage, you’re known as the mortgagor in the home buying transaction. That means you have the responsibility of paying back your lender over the length of your loan – typically 15 or 30 years.

If you’re planning to buy a home in the near future, knowing the roles of the parties involved in getting a mortgage can make the process a lot easier to understand.

What Is A Mortgagor?

Drilling down a bit further, a mortgagor is a person or organization that borrows money to purchase a home or piece of real estate. When most people want to buy a home, they must go to a bank or financial institution to apply for a mortgage loan. In exchange for a loan, the mortgagor (borrower) grants the mortgagee (lender) a lien on the property, which serves as collateral.

Over the loan repayment period, the mortgagor pays back the loan in monthly installments that include interest. Because the property secures the loan, the loan is referred to as a “secured” loan.

Mortgagor Vs. Mortgagee

While the mortgagor makes regular payments on the loan and agrees to a lien on the mortgaged property as collateral for the mortgagee, the mortgagee sets the loan conditions, oversees loan payments and maintains the right to seize the property if the mortgagor falls behind on their payments.

Until the mortgage is repaid in full, the mortgagee will maintain its lien on the property. Essentially, the mortgagee can decide to seize or sell the property if the mortgagor fails to repay the entire loan.

How A Mortgagor Gets A Mortgage Loan

The process by which a mortgagor applies for and receives a mortgage loan is relatively simple. Here are a few items that lenders typically review when considering whether to approve a loan:

• Your credit score and credit history: This gives lenders an idea of your spending history and your likelihood of repaying a loan over a designated period of time.
• Your debt-to-income ratio: DTI compares an applicant’s gross monthly income to the sum of their monthly debt payments. This assessment will help the lender determine if the borrower can afford the monthly mortgage payment for their desired loan amount.
• Employment and income: Lenders will verify your employment status and income so they can confirm your monthly earnings and ability to pay for a mortgage. They’ll also consider any additional assets you possess. 

If the borrower meets the credit score and overall financial requirements for a home loan, they’ll go through what’s known as an underwriting process during which the lender verifies the borrower’s income, assets, debt and property details before issuing final loan approval.

Mortgagor Responsibilities

Once a mortgagor has taken on a mortgage, they’ll have some mortgage-related responsibilities until the loan is paid in full. No matter the type of loan you’re approved for, your major commitments are the same:

• Repaying the loan: You must ensure timely repayment of your mortgage by making consistent payments and adhering to the contract terms and provisions, which vary by lender and loan type.
• Maintaining homeowners insurance: You’ll need to pay homeowners insurance on your property throughout the loan repayment term, and it’s a good idea to keep a homeowners insurance policy on your home even once you no longer have a mortgage. Mortgage lenders require a protective provision called a mortgagee clause, which is added to your property insurance policy during your repayment term and helps protect your lender if your home is damaged.
• Paying property taxes: Throughout your loan repayment term and even once you’ve repaid your loan in full, you’ll have to pay property taxes. These tax payments typically go into an escrow account each month and are then distributed by your lender to local tax authorities on an annual basis.
• Communicating with the mortgagee: You should contact your lender about any major changes to your financial profile since you took on a mortgage. For example, if you experience a job loss and believe it could impact your ability to make on-time mortgage payments, it’s important to proactively negotiate a new arrangement with your lender to prevent late payments that could ultimately leave you trying to avoid foreclosure.

The Right Of Redemption

The right of redemption, also called the equity of redemption, is a homeowner’s right to buy their property even after it’s gone into foreclosure. When a mortgagee chooses to “accelerate” a mortgage, it means a borrower is behind on their payments and must catch up on the payments to the extent that they’ve paid the balance in full. The right of redemption is important because it allows borrowers to recover from financial troubles.

Laws on redemption rights can vary by state, so be sure to check with an attorney if you find yourself in this situation.

The Bottom Line: Have A Clear Understanding Of A ‘Mortgagor’

Understanding who a mortgagor is and the role they play in the home-buying process can only help when the time comes to start house hunting and preparing to make a home purchase.

Be sure to remember the difference between a mortgagor and a mortgagee so you won’t be confused if you hear these terms being tossed around by your lender or real estate agent as you search for a home and seek mortgage approval.

If you’re ready to start the home buying journey, begin the approval process and see what interest rate you qualify for with Rocket Mortgage^®. Feel free to give one of our Home Loan Experts a call at (833) 326-6018.