"Mortgage" term is defined as a method of using property as security for the payment of a debt. It means that if you don't make your payments, the lender can take the home away to cover your missed payments. In most cases, mortgages are involved in real estate purpose and sometimes it only land may be mortgaged. Mortgage is a standard method used by individuals as well as business houses who can either purchase residential property or commercial real estate without paying full amount together immediately. It is very common method used by people around the world.

Let's check main terminology and participants associated with this mortgage process. Main participants of mortgage process are: Creditor and Debtor. Mainly, Creditors are Banks, Financial Institutions, and Insurers who gives loans to the individual or business houses to buy real estate property. Creditor is having rights to take your house back if debtor is not able to pay the loan back to them. Now let's talk about debtor. Debtor may be any house owner, landlord or business house who is purchasing their property by way of a loan. Debtor should satisfy all the conditions of creditor to pay the loan and guaranteed them to take over its property if they will not be able to pay the remaining loan amount. Another important participant should be any legal person who involves in whole deal to make the process completely legal. Generally, lawyer or solicitors are performing this role to involve legal system in to the mortgaging process.

There are mainly two categories of Mortgage loan. Government-backed mortgages and Conventional mortgages.

Government-Backed Mortgages

First type of mortgage is very useful for the first time home buyers because government-backed mortgages are for the borrowers who need low down payments. Government-backed mortgages are issued by the Department of Housing and Urban Development. They will check all the basic formalities about debtor and after that issues loan.

Conventional Mortgages

Conventional mortgages are issued privately by the private mortgage insurance companies. This type is ideal for the buyers with larger down payments. Generally, mortgage payment is divided into paying off principal and interest. Mostly all mortgage loans have monthly payments that are due at the beginning of every month. Here principal is the amount borrowed and interest is the amount charges you by any financial institution or bank to use their money.