CONVENTIONAL MORTGAGE Meaning and
Definition
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A conventional mortgage is a type of home loan that is not insured or guaranteed by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). This type of mortgage is considered the traditional or standard option for purchasing or refinancing a home.
In a conventional mortgage, the borrower typically makes a down payment of at least 20% of the home's purchase price. This enables the borrower to avoid paying private mortgage insurance (PMI), which is required for borrowers who make a down payment of less than 20%.
Conventional mortgages are offered by banks, credit unions, and other financial institutions, and the terms and conditions of the loan are determined by the lender. These mortgages usually have fixed interest rates, meaning the rate remains the same throughout the life of the loan. However, adjustable-rate mortgages (ARMs) are also available, where the interest rate can fluctuate periodically based on prevailing market conditions.
To qualify for a conventional mortgage, borrowers typically need to have a good credit score, a stable income, and a low debt-to-income ratio. The lender assesses the borrower's financial situation to determine their ability to make monthly mortgage payments.
Overall, a conventional mortgage is a mortgage loan that is not backed or insured by the government, providing more control and flexibility to the borrower and being subject to the guidelines and standards set by the lender.
Common Misspellings for CONVENTIONAL MORTGAGE
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Etymology of CONVENTIONAL MORTGAGE
The word "conventional" in the context of a mortgage refers to a type of loan that is not insured or guaranteed by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). The etymology of "conventional" can be traced back to the Latin word "conventionālis", which means "usual" or "ordinary". It refers to something that is based on or follows established practices, standards, or customs. In the case of a conventional mortgage, it indicates a loan that adheres to traditional lending criteria and is not backed by a government entity.
