Which of the following best describes a conventional mortgage?

• A. Loan insured by FHA
• B. Loan guaranteed by VA
• C. Loan not insured or guaranteed by FHA, VA, or RHS
• D. Loan originated by a credit union

Answer: (C)

Conventional mortgages are private-sector loans that are not insured or guaranteed by government programs. That lack of government backing is what sets them apart from loans insured by FHA or guaranteed by VA or USDA (RHS). Because they aren’t government-backed, lenders may require private mortgage insurance if the down payment is small, and these loans can be conforming to standard Fannie Mae/Freddie Mac guidelines or non-conforming (jumbo). The other descriptions refer to government-backed loans or to the lender type, which do not define a conventional loan.