The mortgage process to buy a home or even to refinance it is one that requires a lot of paperwork. Some of these documents include a credit report disclosure, a Truth in Lending disclosure, a Good Faith estimate, and mounds of other documents. These documents compiled together allow the bank or other lender to get an accurate depiction of your income, credit report, bank statements, and your employment history as well which are all relevant in determining financing for you.
A wrap-around mortgage is something that borrowers may want to consider when trying to obtain a real estate loan. This works by giving the borrower a great interest rate for the first mortgage and then a second is taken out. These two are combined into the one with the lower interest rate.
Defining the Wrap-Around Mortgage
In simple terms, a wrap-around mortgage is one where the lender takes on the responsibility for an already existing mortgage. One example of this is Brian who has a $70,000 mortgage but manages to sell his house to James for $100,000. James makes a down payment of $5,000 and has to borrow $95,000. This one essentially “wraps-around” the old one because the new lender makes payments on the old mortgage.
