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
Financial standing of a debtor as a basis to pay obligations. ...
A testator/testatrix who donates real property. ...
People often ask themselves, what does interim mean? By definition, interim means a break or pause in a particular activity. As an adjective, interim means a temporary, provisional, or ...
Hallow masonry wall consisting of an inner and outer wall with dead air space between them. The air space provides increased thermal insulation. Cavity walls are not used in northern ...
Loan guaranty program included in the Servicemen's Readjustment Act of 1944. Its provisions cover the compensation to lenders for losses they might sustain in providing financing to ...
Document issued by a governmental agency permitting the recipient to do something. An example is a building permit to construct a structure. ...
The definition of option explains the term as something that can be chosen in spite of having multiple other alternatives. It could be an option for food, which shows a preference for one ...
The abstract of judgment definition is best explained as a written summary of the judgment passed by a court. This abstract of judgment includes the amount of money the losing party of a ...
As a hopeful house hunter, renter, or seasoned real estate investor, you've probably come across baffling terms. One such term is "adhesion contract." It might sound complex, but don't ...
Have a question or comment?
We're here to help.