Loanfactz Definitions

Conventional Loan

A conventional loan is a * mortgage loan other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA). There is a * down payment required, usually 10 percent to 20 percent of the sales price. A conventional loan does not require * mortgage insurance.

Glossary For This Page
(In Alphabetical Order)

* Default
Failure to perform a legal obligation; a default includes failure to make the payments on a financial obligation, but may also be a failure to perform some action or service that is non monetary (not relating to money).

* Down Payment
Paying a portion of the price of a home which is not borrowed and paid up front.

* Lien
A claim or charge on property for payment of some debt. With respect to a mortgage, it is the right of the lender to take the title to your property if you do not make the payments due on the mortgage.

* Mortgage
A legal document you sign to show that you have granted the lender a * lien on your property as security for repayment of a loan, giving the lender the right to take your property if you * default on the terms of the loan. Some states call it a deed of trust instead of a mortgage.

* Mortgage Insurance (MI)
Mortgage Insurance (MI) or called Private Mortgage Insurance (PMI) is insurance needed for a mortgage with a low down payment, usually a down payment less than 20% of the price of the home or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value. Mortgage Insurance protects lenders against loss if a borrower defaults on the loan. Private mortgage insurance is provided by a private mortgage insurance company, is paid by the borrower (you), and is included in the mortgage payment.

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