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
Map showing the kinds of soil in a designated locality. ...
Contiguous shore area bordering a river that is subject to periodic water level increases. In the flood stage, the flood plain can be under water. ...
Welcome to the world of magical yet perplexing real estate! Undeniably, there's a lot to learn, but we're here to explain miscellaneous terminology so that you can make educated decisions. ...
Enumeration of the consideration given by each party to a contract which in some cases must be in written form to be enforceable. For example, the statute of frauds requires that all ...
Work required as a court judgment because of a crime committed. ...
An arm’s-length transaction is a business deal, or transaction where the seller and buyer act independently of each other without influence on the other party. What sets these types ...
Founded in 1934 and located in Garden, CA with 1993 membership of 9,000, the IRWA is a professional association of appraisers, property managers, title examiners, and others having interest ...
A building having one house hold on the first floor and a second household on the second floor. ...
Founded in 1947 and located in Washington, DC, the NAREB has 7,500 members with 15 regional groups and 6 state groups. It offers certification programs for members of the real estate ...
Have a question or comment?
We're here to help.