Is conventional real estate financing considered creative? A Conventional mortgage loan is considered the traditional type of mortgage loan and is the most straightforward type of residential mortgage available; It is the mortgage against which most other mortgages are measured, meaning that conventional mortgage guidelines are adhered to by every banking institution and licensed lenders that approve loans for real estate financing pursuant to Fannie Mae and Freddie Mac guidelines.
These guidelines required that a borrower seeking approval for a conventional mortgage loan must document the ability to manage a 20% down payment (20% of the purchase price or appraised value, whichever is less); Enough monthly income, 28% of which must support payments of Principal & Interest plus Taxes & Insurance (PITI) and 36% must support a total monthly payment when all other monthly revolving & installment debt payments are added to PITI (e.g. credit cards, student & auto loans, etc.), excluding utilities; Creditworthiness (evidenced by a minimum credit score of 720). You could say that mortgage loans with guidelines other than the conventional (Fannie Mae & Freddie Mac) standards are creative real estate financing programs, but conventional financing would not considered as creative real estate financing.
Even before the modern-day conventional loan existed in its present form, steps taken by potential homeowners requiring real estate financing to complete their purchases were long and hard; fraught with sacrifice and many would-be homeowners sustained great loss due to the lack of reasonable mortgage lending terms. Based on a Rob Alford article on the History News Network (HNN), a George Mason University website, "Fannie Mae was created in 1938 as part of Franklin Delano Roosevelt's New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing".
Non-FHA mortgage terms prior to Fannie Mae Mortgage required a borrower's down payment to be 50% of the purchase price to qualify for a five year "Interest Only Balloon" mortgage loan. These terms were made available through private lenders, many of whom discontinued lending due to the collapse of the national housing market. Fannie Mae and later Freddie Mac are GSEs (Government Sponsored Enterprises) that "...controlled about 90% of the nation's secondary mortgage market..." and are the primary purchasers of conventional mortgage paper despite having been taken over by the federal government (conservatorship) in September of 2007. Other than conventional real estate financing programs, there is currently one other popular loan program that has been insuring mortgage loans since being created by congress in 1934. Read more...