MortgageA large chunk of mortgages in the country are conventional mortgages. The question remains: what is a conventional mortgage? About thirty to thirty five percent of mortgages being listed every year are conventional. This is due to the high equity it offers as well as the relaxed requirements in its application. Compared to all other available mortgage arrangements in the country, conventional mortgages are safer, low-risk and are more forgiving to both the buyer, the seller as well as the banks.

What is a conventional mortgage?

Most people ask, “what is a conventional mortgage anyway?” Simply put, it is a loan based on no more than eighty percent of the value of the property. The basis of the value of the property must be its appraised value. In other words, the basis is the purchase price or the fair market value of the property.

How much should I shell out for my initial down payment?

The down payment should be about twenty percent of the purchase price. This may be paid by you or the seller, depending on your arrangement. You may choose to pay a larger portion of the selling price to save on the installment interests.

What if I need more?

If your loan needs more than eighty percent of the whole value, this will be filed as a high ratio loan. Unfortunately, you will be made to acquire a mortgage security. More documentary proof will also be required to secure the whole transaction.

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What is “immediate and higher equity”?

One of the major benefits of a conventional mortgage loan is the immediate and higher equity. As the purchaser, you will easily gain greater interest in the property as compared to any other mortgage arrangement. This is beneficial for you and the bank since this will effectively convert your loan to a low-risk venture for the bank. The change in the nature of your loan will open the doors to more benefits such as credit and financing alternatives and exemption from mortgage insurance requirements.

Conventional mortgages will yield you higher property equities and lesser installment interests. If you have the money for higher down payment rates, explore the possibility of conventional mortgages. Make sure that you are able to review the loan contract before signing.