What defines a conventional mortgage?

A conventional mortgage is characterized by the fact that it is not backed by any government guarantees or insurance. This type of loan typically adheres to guidelines established by government-sponsored enterprises like Fannie Mae and Freddie Mac, which include specific credit requirements, down payment standards, and loan limits. Since conventional mortgages do not involve federal or state government insurance, they usually require a stronger credit profile and may necessitate private mortgage insurance (PMI) if the down payment is less than 20%.

The other options describe different types of mortgages or features that do not apply to conventional mortgages. For instance, a loan backed by government insurance refers to FHA or VA loans, which are designed to help specific borrower populations. A type of loan exclusive to first-time buyers does not accurately describe conventional loans since they can be taken out by anyone, regardless of their buying history. Lastly, a variable-rate mortgage is a specific feature relating to how interest rates are structured rather than the definition of the type of mortgage itself. In essence, a conventional mortgage stands out because it operates independently of government backing, which impacts the risk and cost associated with borrowing.