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
Government official who values real estate property for tax purposes and ascertains the annual property tax assessments that must be collected. ...
Time period for which one expects to keep property such as a real estate investment. ...
Something that is of good value for the money and an attractive deal. ...
To default on a loan means to intentionally or unintentionally miss several consecutive monthly payments over the course of a few weeks or months. Most borrowers learn the definition of ...
Absence of a personal liability such as when a creditor may seize an office building used as security for the obligation but cannot attach any other assets of the debtor. ...
The definition of obligee is the person to whom a debt or obligation is owed. An obligee is one party of a contract to who the other party, the obligor, is obligated. An obligee is also the ...
Items of real and personal property that usually have a long life, such as housing and other real estate. ...
Corporation having only one person, A corporation sole is primarily used for the purposes of a nonprofit ecclesiastic church related organization. Ina church, the corporation sole is headed ...
(1) Type of loan where the final payment is substantially greater than the previous payments; also termed partially amortized loan. A debt agreement might stipulate a balloon payment when ...
Have a question or comment?
We're here to help.