Which of the following is true about conventional loans?

Which of the following is true about conventional loans?

• A. They are always fixed-rate loans
• B. They increase homebuyer accessibility
• C. They are not backed by the government
• D. They have no maximum limit

Answer: (C)

Conventional loans are defined as mortgage loans that are not directly insured or guaranteed by any government agency, such as FHA, VA, or USDA. This distinguishing feature means that conventional loans rely on private lenders for funding and come under different guidelines and standards compared to government-backed loans. Because they are not structured around government assistance, lenders often have more flexibility in their underwriting processes and requirements for these loans. The character of conventional loans makes them a common choice for many borrowers who may not need special assistance programs or who seek to avoid the restrictions that can accompany government-backed loans. Hence, the statement that conventional loans are not backed by the government is accurate. While fixed-rate loans are a type of conventional loan, not all conventional loans are fixed-rate; they can also be adjustable-rate mortgages. Regarding accessibility, conventional loans can sometimes have stricter credit and down payment requirements, which might limit some potential homebuyers. Additionally, there are generally maximum limits imposed on conventional loans depending on the area, driven by conforming loan limits set by regulators. This makes the selection of the accurate characteristic critical to understanding the nature of conventional loans.

Conventional loans are defined as mortgage loans that are not directly insured or guaranteed by any government agency, such as FHA, VA, or USDA. This distinguishing feature means that conventional loans rely on private lenders for funding and come under different guidelines and standards compared to government-backed loans. Because they are not structured around government assistance, lenders often have more flexibility in their underwriting processes and requirements for these loans.

The character of conventional loans makes them a common choice for many borrowers who may not need special assistance programs or who seek to avoid the restrictions that can accompany government-backed loans. Hence, the statement that conventional loans are not backed by the government is accurate.

While fixed-rate loans are a type of conventional loan, not all conventional loans are fixed-rate; they can also be adjustable-rate mortgages. Regarding accessibility, conventional loans can sometimes have stricter credit and down payment requirements, which might limit some potential homebuyers. Additionally, there are generally maximum limits imposed on conventional loans depending on the area, driven by conforming loan limits set by regulators. This makes the selection of the accurate characteristic critical to understanding the nature of conventional loans.