Conventional loan
National Real Estate Exam glossary · Financing
Definition
A mortgage loan that is neither insured by the FHA nor guaranteed by the VA. When the loan-to-value ratio exceeds 80 percent, the lender typically requires private mortgage insurance to protect against default.
Conventional loan in plain English
When you borrow money to buy a house, the government sometimes acts as a safety net for the lender through special programs (FHA and VA). A "conventional" loan is simply a regular home loan with no such government backing — it stands on its own between you and the lender. Because the lender takes on more risk, they watch how much of the home's price you're borrowing: if you put down less than 20% (meaning your loan is more than 80% of the value), they usually make you pay for private mortgage insurance, a small monthly fee that pays THEM back if you stop making payments. Think of it like a deposit on a rental — the smaller your upfront skin in the game, the more the landlord wants extra protection.
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Practice Conventional loan
A first-time buyer with a modest down payment gets a… What type of loan is this most likely to be?
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