Final answer:
The correct collateral that secures a mortgage is the house itself (Option 2). Collateral is the asset that a lender accepts as security for a loan, giving the lender the right to seize and sell the asset if the loan is not repaid.
Step-by-step explanation:
The correct collateral that secures a mortgage is Option 2: The house itself. In the context of a mortgage loan, collateral refers to an asset that a lender accepts as security for the loan. The asset, in this case, is the house being purchased. If the borrower fails to make the necessary payments on the mortgage, the lender has the right to seize the property, which serves as collateral, and may sell it to recover the balance owed on the loan.
This arrangement ensures that the lender has a form of security or protection against the borrower's potential inability to repay the loan. While down payments, such as 5% or 20% of the purchase price, can be required as part of the mortgage process and might affect the need for mortgage insurance, only the house itself serves as collateral for the mortgage loan.