Mortgagor shaking hands with a mortgagee.

Mortgagor: A Definition

Victoria Araj3-minute read

February 26, 2022

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If you’re buying a house, you’ll likely have to take out a mortgage. A mortgage is a loan that covers the cost of your home that you can’t pay for and is typically paid back over 15 – 30 years. If you plan to take out a mortgage, you’re known as the mortgagor in the home buying transaction. Let’s review everything you’ll need to know when you become a mortgagor.

What Is A Mortgagor?

A mortgagor is a person or organization who borrows money to purchase a home or piece of real estate. When a person wants to buy a home, they must go to a bank or lending institution to ask for a mortgage.

Mortgagor Vs. Mortgagee

In a real estate agreement, the mortgagor is the borrower of a mortgage loan and the mortgagee is the lender. The mortgagor makes regular payments on the loan and agrees to a lien on the mortgaged property as collateral for the mortgagee. By contrast, the mortgagee sets the loan terms, oversees its payment and maintains the right to seize the property should the mortgagor fall behind on their payments.

Until the mortgage is repaid in full, the mortgagee will maintain ownership of the property. Essentially, if the mortgagor fails to repay the entire loan, the mortgagee can decide to bid or sell the property.

How Mortgage Loans Work

A mortgage is a loan that helps a person buy a property. Typically, the mortgagor has put down at least 3% of the property’s value to show that they’ll be able to pay back the rest to the lender or mortgagee.

In exchange for a loan, the lender gives the mortgagee the title to their home as collateral to ensure that they’ll pay off the home over time. For anywhere from 15 to 30 years, the mortgagor pays back the loan in monthly installments, plus additional interest. Since the mortgagor is securing the loan with collateral, it’s known as a secured loan.

How A Mortgagor Gets A Mortgage Loan

The process by which a mortgagor applies for and receives a mortgage loan is relatively simple. The first thing a lender typically looks at is a borrower’s credit score and credit history. If the borrower’s credit score is strong enough to qualify for a loan, the borrower will undergo an underwriting process. In underwriting, the lender verifies the borrower’s income, assets, debt and property details to issue final approval for their loan.

There are several types of loans mortgagors might consider in addition to a conventional mortgage. For example, a government-backed loan such as an FHA loan only requires a borrower to put 3.5% down, even if they have a lower credit score. However, the interest rates on these loans are typically a bit higher.

Another government-backed loan you may consider is a VA loan, insured by the Department of Veterans Affairs. A VA loan can allow you to buy a home with $0 down and lower interest rates than most other types of loans. However, you must meet service requirements in the Armed Forces or National Guard to qualify.

Another option you may consider if you decide to go with a conventional mortgage is an adjustable-rate mortgage (ARM). An ARM is a 30-year loan with interest rates that change after the fixed period expires, depending on how market rates move.

Every lender will have different underwriting requirements, terms and interest rates. That’s why it’s important to research different types of loans to decide which interest rate, down payment, mortgage insurance and loan terms are right for you.

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Mortgagor Responsibilities

Once a mortgagor has gotten a loan, they’re responsible for a few things throughout the life of the loan. First of all, they must make consistent mortgage payments, and abide by the contract terms and provisions. These terms of your mortgage agreement can vary depending on who your lender is and what type of loan you have.

Equity Of Redemption

The Equity of Redemption is the right of a homeowner to buy their property even after it has gone into foreclosure. When a mortgagee chooses to “accelerate” a mortgage, it means that a borrower is behind on their payments, and they must catch up on the payments to have paid the complete due amount in full. Equity of Redemption is important because it allows borrowers to recover from financial troubles.

The Bottom Line

A mortgagor is the borrower in a home buying process. They take a loan from a mortgagee and are expected to pay back the amount that they borrowed plus interest in installments over up to 30 years. If you have further questions about what loan is right for you or how to start the home buying process, be sure to check out Rocket Mortgage® for further tips and information.

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.