Dear Edith: I have someone who has asked me to be their mortgagor, and I was wondering, how does one go about the paperwork? Are there standard forms to be used? How does one file the mortgage lien? Would a real estate attorney be advisable or necessary? I have the wherewithal and based on current equity markets and savings rates, this looks like a better income rate. Advice? — K. B.

Answer: When you lend the money, you're not the mortgagor. You'd be the mortgagee, the one who receives and holds the mortgage. The mortgager is the borrower, the one who does the mortgaging, pledging the real estate as security for the loan.

Yes, a mortgage can be a good fixed-income investment, but you always have to wonder why this borrower isn't getting an institutional mortgage instead of coming to you. Do you really want to lend money to someone who may have been rejected by banks as a poor risk?

To protect yourself, take the same precautions institutional lenders do. First, make sure a decent down payment is involved, or equity if we're talking about a refinance. You want the borrower to have sufficient money tied up in the property so there's never a temptation just to walk away. And you need some assurance that if it ever came to a foreclosure auction, there'd be enough value to get your money back.

Then, before you're committed to anything, analyze the borrower's credit record, other debts and income (perhaps with the help of your own CPA .) Do they pay their other bills on time? And — as banks do — you should certainly have your own lawyer draw up the documents and take care of putting them on record. Holding a mortgage is too big an investment to risk making do-it-yourself mistakes.

Who Gets the Money

Ms. Lank: I have been living with someone for 10 years. I own the house and pay the majority of the repairs. A few years ago, we put on an addition, which I paid for. He pays half the mortgage and the cable, phone, etc.

He thinks that if we sell, he is entitled to half the profit. I think everything is mine. — X.

Answer: If you are the sole owner, you are legally entitled to all the proceeds from a sale.

Significant Other Passed

Dear Edith: My significant other passed away just before Christmas. 0ur house deed is in both our names but the loan is only in his. I called the Bar Association and a real estate lawyer said my best bet was to just keep paying the mortgage, since I probably wouldn't qualify for a loan on my own. Do you agree? Also, what if I decided to sell? I am halfway through a 30-year mortgage. — Email

Answer: Lenders don't usually call in a mortgage loan when property is inherited, so yes, keep on paying. But are you sure you inherited the other half of the ownership? The answer may depend on how your deed was worded, whether your partner left a will and what family members he had. If you haven't settled that question, get back to the lawyer. If you are indeed full owner (the confusing legal term is "owner in severalty"), you shouldn't have any complications in selling.

Which Comes First

Ms. Lank: I'm confused? To purchase a property we are looking at, we need a commercial loan. My realtor says she can't bid unless we have a pre-approval letter from a bank. But the bank wants to know the purchase price of the property before they will pre-approve us.

We have A+ credit and income and should not have any issue being qualified. I don't know what to do. Can a realtor bid without the pre-approval or not? Others have told me she can bid. — D. W.

Answer: It's not the agent who "bids" - it's you, the buyers, who sign an offer. The law requires agents to submit all written offers. But the seller's agent must also obey the seller's instructions. Perhaps the property owners have said they only want to hear from buyers who are already pre-approved for financing.

It's not clear why you can't get that before you have a binding purchase contract. Pre-approval letters are usually issued to qualified buyers who have not yet found the property they want. The letter would state that the buyers can borrow a certain amount, but only if they buy property that meets the lender's standards.

Talk with a mortgage broker, who may have other lenders to suggest.

Edith Lank will respond personally to any question sent to www.askedith.com.