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
Imagine someone asking you about the definition of the real estate market. At first sight, it may seem like an easy answer. But wait! Could the real estate market meaning be more complex ...
In general terms, a licensee means a person or legal entity who has received authorization or permission to perform a particular activity through another party (the licensor in our case.) ...
The Federal Reserve Bank's regulation applying to the amount of credit that may be advanced by brokers and dealers to customers to buy securities. ...
Enclosed building that stores agricultural products (hay, livestock or farm equipment). ...
The term mortgage amortization is the steady switch occurring to each mortgage payment between how much interest is covered and how much principal each month. Simply put, mortgage ...
List of business property. ...
Regulation of the Securities and Exchange Commission (SEC) establishing the criteria to avoid a private offering. For example, John wants to sell shares in an apartment house to several ...
Charge levied against property owners to finance an improvement made by the local government which benefits the homeowners and commercial businesses. Examples are sidewalks and sewers. ...
Those factors causing the movement of people, industry, and business from the central city to the outside central city areas, suburbs, and/or small cities. Elements of the dispersing force ...
Have a question or comment?
We're here to help.