A mortgage not insured or guaranteed by a government agency, typically requiring stronger credit and larger down payments.
Why Conventional Loan matters on the exam
This term belongs to Financing. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Conventional Loan
Every Freehold question shows why the right answer is right — and cites its source.
Private mortgage insurance (PMI) is generally required on a conventional loan when:
The borrower is a first-time homebuyer
The loan is insured by the FHA
The loan-to-value ratio exceeds 80 percent
The property is a condominium
Show answer & explanation
The loan-to-value ratio exceeds 80 percent — Conventional lenders require PMI when the down payment is under 20 percent, meaning the loan-to-value ratio exceeds 80 percent. PMI protects the lender against loss if the borrower defaults.
Source: PSI National Real Estate Exam Content Outline §4 Financing
A conventional loan is best defined as a loan that is:
Insured by the FHA, a federal agency that insures loans against borrower default
Made without government insurance or guarantee
Guaranteed by the VA
Funded exclusively by the USDA under its rural housing loan guarantee program
Show answer & explanation
Made without government insurance or guarantee — A conventional loan is originated by a private lender without government insurance or guarantee, distinguishing it from FHA-insured, VA-guaranteed, or USDA-guaranteed loans.
Source: PSI National Real Estate Exam Content Outline §4 Financing
A conventional loan that meets Fannie Mae and Freddie Mac underwriting guidelines and loan limits is called a:
Jumbo loan
Subprime loan
Conforming loan
Blanket loan
Show answer & explanation
Conforming loan — Conforming loans meet the size limits and underwriting standards set by Fannie Mae and Freddie Mac so they can be purchased on the secondary market; loans above the limit are jumbo loans.
Source: PSI National Real Estate Exam Content Outline §4 Financing
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