If you are looking to purchase your dream home, you’ll likely need financial help, which can come in the form of a loan. A mortgage loan is a go-to loan for individuals who wish to own a home but don’t have the money to buy a home outrightly. Like other loan processes, you’ll need to apply to get a mortgage loan. If you apply to a bank, you expect the bank to create a record and, of course, keep it but for how long?
Banks keep credit card records for around five years. In the case of a mortgage, it is usually around seven years. However, worthy of note is that the duration may vary per organization.
Many homeowners are advised to keep their mortgage records for three years. Of course, your lender, who in this case is a bank, will have their copies. But for how long will they keep theirs? There is only one way to find out.
How Long Do Banks Keep Mortgage Records?
Human needs clothing, food, and a home to thrive; they are all basic needs. However, with the average wage and salary per full-time equivalent employee in the US at $71,456 in 2020 and the average cost of buying a house at $306,000 (in 2020), you expect many Americans to struggle to purchase their dream home.
Thanks to the introduction of a mortgage loan, Americans can buy their dream houses. However, like other loans, taking a mortgage loan has its ups and downs. So, let’s take a look at what a mortgage loan is before we touch on the main purpose of this article.
A mortgage is a type of loan, different from the typical type of loans you know. It is loan used to buy or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, usually in a series of regular payments divided into principal and interest. The property serves as collateral to securer the loan should the lender default.
A borrower must apply for a mortgage via their preferred lender and make sure that they meet multiple requirements, including minimum credit scores and down payments. Mortgage applications often undergo a meticulous underwriting process before reaching the closing phase. There are different types of mortgages, and they usually vary depending on the borrower’s needs. Common types of mortgages are conventional and fixed-rate loans.
Who Gets a Mortgage?
Many of the people out there who buy homes do so with the help of a mortgage. A mortgage is essential if you can’t settle the full cost of a home out of pocket. However, there are some cases where it is wise to have a mortgage on your home even though you have enough cash to settle it. For instance, sometimes mortgage properties to free up funds for other investments.
Difference Between a Loan and a Mortgage
The term “loan” is pretty common. It can be used to describe any financial transaction where one party gets a lump sum and agrees to repay the money. A mortgage is a type of loan used to finance a property such as a home. Of course, judging by the definition of a loan, it is safe to say that a mortgage is a type of loan, but not all loans are mortgages.
Mortgages are “secured” loans. With such loans, the borrower promises collateral to the lender should they stop making payments. In the case of a mortgage, the collateral is the home. If you default on your mortgage, your lender can claim your home in a process widely known as foreclosure.
How Does a Mortgage Loan Work?
When you get a mortgage, your lender gives you a specific amount of money to purchase your dream home. You agree to return the money, with interest, over a period of several years. The lender’s rights to the home continue until you repay every dime of the mortgage. Fully amortized loans come with a set payment schedule so that the loan is settled at the end of the agreed period.
The difference between a mortgage and other loans, as discussed earlier, is that if you default on the loan, your lender can sell your home to recover its losses. Compare that to what occurs if you default on your credit card payments: you don’t have to return what you purchased with the card, though you may have to pay late fees to bring your account current in addition to handling adverse effects on your credit score.
The Mortgage Process:
Potential borrowers start the process by applying to one or more mortgage lenders. The lender will request evidence that the borrower is creditworthy. The evidence may include bank and investment statements, current tax returns, and proof of current employment. The lender will generally conduct a credit check also.
If the application is accepted, the lender will offer the borrower a loan of up to a specific amount and a certain interest rate. Home buyers can apply for a mortgage after they have chosen a property to buy or while they are still searching for one, a process regarded as pre-approval. Being pre-approved for a mortgage can give buyers an upper hand in the complex housing market, as sellers will know that they have the cash to support their offer.
Once a buyer and seller agree, they or their reps will meet at what is commonly regarded as closing. This is when the borrower makes their down payment to the lender. The seller will transfer ownership of the property to the buyer and receive the agreed-upon money, and the buyer will sign any leftover documents, thus making them a new homeowner.
Mortgage Records: How Long Does It Stay With Banks?
A mortgage involves much paperwork, from the stack of documents you’ll get at closing to the statement you’ll continue to receive from your bank as you settle the loan. Of course, like you, these banks keep a comprehensive record of your mortgage for future reasons.
Banks offering mortgages keep mortgage records for around 6-7 years. You expect them to have an updated record of your mortgage for this timeframe, since the statute of limitation for debts is around 6 years.