Most home mortgage loans are made by mortgage companies, banks, savings and loan associations, or building and loan associations.  However, anyone, including a private individual, may make a mortgage loan. Most home mortgages are “purchase money” mortgages, where the loan is made for the purpose of paying some, or all, of the purchase price of the property on which the mortgage is given.

There are two competing legal theories about the legal nature of a mortgage arrangement.

  • A minority of states adhere to the title theory of mortgages under which the title to the property being mortgaged remains with the lender until the loan is paid. Once the loan is paid, the title to the property passes to the purchaser.
  • A majority of states adhere to the lien theory of mortgages under which the title to property passes to the purchaser regardless of the mortgage, while the lender has a lien on the property rather than title to it.

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