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
The word ““doc”” is an abbreviation for a document. Typically, a doc defines any recorded materials, including letters, photographs, inscriptions, text, reproducible ...
A capitalization method which divides a properties first year net operating income by an estimated general capitalization rate to develop a total property estimate. ...
Use of other people's money (OPM) in an attempt to maximize the return but at high risk. The use of leverage in real estate investing is a way to maximize yield on a small down payment. ...
A clause inserted in a mortgage agreement requiring a future buyer of the subject property to obtain the consent of the lending institution prior to assuming the mortgage. In this ...
Water/plaster mix used as a surface for walls and ceilings. ...
The definition of restraint on alienation is a limitation on the right to convey or transfer owned real estate to another party. This restriction on conveying property has an effect that ...
person designating an agent to act for him. Primary individual having full financial liability. Amount being risked in a real estate investment. Owner of a real estate business. ...
Considering future occurrences that may possibly arise. ...
The definition of a testator in real estate is an individual who makes or leaves a valid will detailing how their possessions are to be divided or distributed among their heirs. The ...
Have a question or comment?
We're here to help.