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
(1) Revising the selling price of real property to reflect what it would be worth if typical financing was available. (2) How much real property would be sold for if all cash was involved. ...
Divider made of plasterboard or plaster used to partition rooms. A room is created by the walls surrounding it. ...
Width of a stair. ...
Personal property or real property that are passed on to heirs upon one's death. ...
Person's sole ownership of real property. ...
Upper layer of ground. ...
Principle stating that the joint tenants must have equal rights to possession of the whole property. ...
The ratio between a structure's total floor area and the total land area of the land upon which it is constructed. The floor area ratio definition is the ratio of the total amount of usable ...
Decision rendered by a court of law. ...
Have a question or comment?
We're here to help.