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
To fulfill , complete, implement, perform, or carry out terms of an agreement including completing a signature on a contract and delivering a document to the intended party. ...
Legal contract in which the lender controls the pledged property being financed. The agreement describes the property and its location. Of default occurs, the lender may sell the ...
Multistory, nineteenth-century house featuring turrets, high chimney, and decorative trim. ...
The units are used as commercial offices. The purchaser of an office condominium owns the title to the individual office unit and not to the property. Maintenance fees are assessed to each ...
Real estate, home and life insurance use numerous ambiguous terms you should know because you can significantly benefit from them. Let’s discover what the word boot usually applies to ...
Same as term right of first refusal: Right of an individual to be offered something before it is offered to others. For example, a tenant whose apartment is going to be converted to a ...
A fully amortized mortgage necessitating periodic payments of both interest and principal. In the early years of the loan, the share of principal is smaller and the interest larger, a ...
An anticipatory breach of contract is the action that occurs when one party in the contract shows their intention to not fulfill their contractual obligations to the other party. The ...
Favorable occurrence providing a good chance for success, usually in financial terms. ...
Have a question or comment?
We're here to help.