{{B}} Applying for a mortgage{{/B}}
Susan Thomas and her husband Alan have decided to buy a house. They have seen one that they like and now have to get a mortgage loan. Susan goes to see Joan Bentley. Ms. Bentley works in the mortgage department of the Yorktown Bank in Texas, where the Thomases live.
Ms. B: Hello, Mrs. Thomas. How are you today? I hear you want to apply for a mortgage loan with us.
Mrs. T: That's right. I hope you have the time to answer some questions, though. My husband and I have never owned any real estate before and we have only elementary ideas about mortgages.
Ms. B: I'll be happy to help you in any way I can. What would you like to ask?
Mrs. T: First, is there any difference between a mortgage and a mortgage loan? I have heard both terms used.
Ms. B: Yes there is, although in everyday speech people call the mortgage loan'a mort- gage. The mortgage is actually a written document. In legal terms it is called an instrument of conveyance because it transfers title of property from one party to another. The mortgage loan is, of course, the money that the mortgagee lends to the mortgagor so that the mortgagor can buy a house or some other piece of real property. Mrs. T: I see. That's clear to me now, but something has been worrying me. Many of my friends have told Alan and me that it won't be easy to get a mortgage. I don't know what they mean--Alan and I have always held good jobs. It seems that two good risks like us wouldn't have much difficulty in getting financing for a new home.
Ms. B: The problem isn't the element of risk. The supply of mortgage money has become very tight lately. Also, with interest rates rising, banks don't want to lend a large sum of money for 25 or 30 years at a fixed rate.
Mrs. T: When you mention fixed rates you remind me that I have been hearing a lot about variable - rate mortgages. I'm not quite sure that I understand exactly what they are, but people say more and more banks are using them now.
Ms. B: I can explain them to you. In the past, the borrower or mortgagor paid the same rate of interest over the life of the mortgage. Monthly payments to the bank were the same for 30 years. But with variable-rate mortgages they can be adjusted every six months to changes in the interest rates banks pay on deposits.
Mrs. T: That sounds very upsetting to me. What if the borrower gets a very large increase? How would he meet his payments? Variable - rate mortgages must greatly increase the possibility of the bank's foreclosing.
Ms. B: Not really. The bank can't adjust the rate more than 1/4 of one percent for any six - month period. And most banks give an initial guaranteed - rate period of six months to five years. During this period, no adjustments are allowed. However, there's no limit to how much the rate that you pay can rise or fall over the life or the mortgage.
Mrs. T: Why have banks begun to insist on variable-rate mortgages? The old system seems so much simpler.
Ms. B: I'll admit it was simpler, but changes in conditions have made it difficult for banks to keep the system of fixed - rate mortgages. With certificates of deposit and other term - de- posit accounts, banks now pay very high interest rates to depositors in order to attract their money. These interest rates fluctuate, too, so banks want the protection of variable - rate mortgages.
Mrs. T. Your explanation makes me feel more secure about variable -rate mortgages. How much does your bank expect as a down payment?
Ms. B: Between 10% and 20% of the purchase price. Is that possible for you and your husband?
Mrs. T: Yes. We have saved enough money for that. I would like to fill out an application.
Ms. B: Fine. Here's one. We will be able to let you know whether we approve it or not in a week or ten days.
Mrs. T: Thank you very much.
Comprehension check
State whether each sentence is true or false based on the dialogue of this lesson.