1. Finance
  2. Mortgages
  3. Mortgages
  4. Mortgagor vs. mortgagee

Mortgagor vs. mortgagee

Which one’s the borrower?

Author picture
Written by
Author picture
Edited by

Start your home buying journey. Get matched with an authorized partner.

mortgage lender handing over house keys to homebuyer couple

One common mistake when buying a home is confusing the terms “mortgagor” and “mortgagee,” two words you’ll see as you read over documents from your mortgage lender.

  • A mortgagor is the party borrowing a home loan.
  • A mortgagee is the party lending money for a home loan.

Make sure you know which is which before you get further along in the borrowing process.

What is a mortgagor?

A mortgagor is the borrower of a home loan. The mortgagor agrees to pay back the total amount borrowed — the loan principal — plus interest by a specific date (called the maturity date). Generally, mortgagors are required to make set monthly payments throughout the loan term.

The mortgagor is responsible for making mortgage payments on time and paying annual property taxes. If they miss their tax payment, they could have a lien placed on their property for the unpaid taxes. This could result in foreclosure if the debt remains unpaid.

As a mortgagor, you’ll also need a homeowners insurance policy on the property. This protects you from financial losses resulting from an accident or disaster. It also guards the lender’s interests, making the home a more secure form of collateral for the loan.

Your responsibilities as a mortgagor should be detailed in the mortgage agreement, so review this document carefully before you sign. For example, the mortgagor usually has a legal obligation to preserve and maintain the property (like repairing damage that could result in the home’s value decreasing).

What is a mortgagee?

The mortgagee, also known as the mortgage lender, sets the loan terms, including the interest rate and the maturity date. The mortgagee collects and reviews documentation submitted by the mortgagor (e.g., bank statements and W-2s).

The lender uses this information to complete the underwriting process, which is a thorough review of the required financial documents to determine the borrower’s loan eligibility.

The mortgagee also files the necessary paperwork to create a perfected lien on the home. This protects the mortgagee in the event of default — essentially, it establishes that the lender (mortgagee) can legally sell the property if the borrower (mortgagor) doesn’t pay back the loan.

Another mortgagee responsibility is to confirm that the mortgagor maintains a homeowners insurance policy. Usually, the mortgagee collects part of the mortgagor’s monthly payment to set aside in an escrow account for this purpose. The funds in escrow are then used to pay the annual insurance premium and property taxes. Escrow accounts help the mortgagee guarantee these are paid in full each year.

How a mortgage works

The steps in the mortgage process are fairly standard from lender to lender, even if the loan products and terms differ between mortgagees.

1. Choose the right mortgage for you

You can apply for either a conventional or government-backed mortgage. The best type of mortgage loan for you will vary based on your individual situation and what you qualify for. For example, if you’re unable to offer a down payment and meet the qualifying requirements, you could apply for government-backed loans that require no down payment, like USDA loans or VA loans. Your lender can make recommendations for the appropriate type of loan for you.

2. Submit documentation for underwriting

Once you’ve completed the application, your lender will ask you to submit financial documentation for the underwriting process. You may receive pre-qualification after submitting your application, but you won’t know if you’re approved for the loan until the underwriting process is complete.

3. Get preapproval

After a potential mortgagee reviews your finances in underwriting, you’ll get an approval decision (called preapproval). You’ll receive a document called a Loan Estimate, which shows the maximum amount you can borrow, the quoted interest rate and other loan terms. This document also gives details on your estimated monthly payments and closing costs.

Once you have preapproval, you’ll go house hunting and make offers on homes you like.”

4. House-hunt

Once you have preapproval, you’ll go house hunting and make offers on homes you like. If a seller accepts your offer, you’ll move into the closing process. Closing requires more research from the underwriters — their job at this point is to ensure that the home you plan to buy meets their qualifications. This is when the home appraisal, home inspection and title search come in. The final loan approval is contingent on these results.

5. Get final approval and close on your new home

At this point, as long as certain mortgagee conditions are met, you’ll secure verified approval for the loan. You’ll receive Closing Disclosures at least three business days before the closing date so you can review them carefully before you sign. These documents contain loan information similar to what’s in the Loan Estimate, but they provide more finalized costs, like the exact closing costs and the cash you’ll need to close.

You’ll also get an amortization schedule, which shows the principal and interest breakdown of your monthly payments over time. The mortgage process concludes when you sign the disclosures at closing.

Start your home buying journey. Get matched with an authorized partner.

    Bottom line

    The mortgagor is the individual borrowing money to buy a home, and the mortgagee is the mortgage lender. If you plan to buy a home in the future, knowing the roles of both the mortgagor and the mortgagee can help you better understand how the mortgage process flows.

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. To learn more about the content on our site, visit our FAQ page.
    1. National Consumer Law Center, “Sample Loan and Other Documents.” Accessed February 23, 2022.
    Did you find this article helpful? |
    Share this article