Conventional Mortgage
Definition of "Conventional mortgage"
A mortgage requiring a substantial down payment. It is usually only available to those having good credit, and has fixed monthly payments for the life of the loan. It usually has a 30 year period of fixed interest rates discharged on an amortized basis with equal monthly payments. The term conventional refers to a mortgage that is not FHA-insured or VA-guaranteed. Since there is no third person or entity to insure or guarantee the mortgage, the lender assumes full risk of default by the borrower. A lenders decision to make a conventional mortgage is usually dependent upon: (1) the value of the property being used to secure the debt and (2) the credit and income position of the borrower. As more and more conventional mortgages have been made, the loan to value ratio (relationship between the amount borrowed and the appraised value of the property) has continued to increase, even though most lenders still limit the amount they will lend to no more than 80% of value unless private mortgage insurance is carried. This down payment required is higher than with either VA or FHA loans. As the market price of residential real estate has continued to increase, a larger cash down payment has been required of the borrower, and thus many people have been eliminated from financing with a conventional mortgage. With both guaranteed and insured mortgages, people have been able to purchase real estate with a smaller cash down payment.
Popular Real Estate Terms
Managing the day-to-day activities in a real estate brokerage office including recruiting and training new real estate agents, holding real estate closings, updating and managing real ...
An insurance policy indemnifying a property owner up to the limits of the policy against fire or other hazard requiring the total destruction and removal of the structure. ...
British thermal unit-a unit of energy associated with the creation of heat. Prior to 1929, it was defined as the amount of heat required to raised the temperature of 1 pound of water 1 ...
A wall or roof which extends beyond a lower wall. ...
The difference between the present value of cash inflows generated by real estate and the amount of the initial investment. The present value of future cash flows is computed using the cost ...
percentage of land that may be used productively to the total square footage of the land. For example, if total square footage is 40,000 but only 30,000 square feet may be built upon ...
(1) Short-term loan that is made in anticipation of permanent longer term loans. The interest rate on such a loan is usually higher than on longer term loans. (2) A business loan in which ...
Heat resistance measure commonly used with insulating material, outside walls, and roofs. The higher the R value, the more heat transfer resistance a material has." ...
Individual engaged in selling a product or service. The product may be an investment in real estate. In some instances, state law may require licensing to safeguard the public by requiring ...
Have a question or comment?
We're here to help.