What is a conventional mortgage loan?

A conventional mortgage loan is defined primarily by the absence of mortgage default insurance. This means that the loan is secured by a borrower's promise to repay and is typically offered to borrowers who meet certain creditworthiness standards, thus reducing the lender's risk. Conventional loans usually require a down payment of at least 20%, but some lenders may offer options with lower down payments without insurance if the borrower has a strong credit profile.

The focus on conventional mortgages is often associated with the criteria set by government-sponsored enterprises (GSEs) like Fannie Mae or Freddie Mac in the United States. While there are insured loans, such as those backed by the Canada Mortgage and Housing Corporation (CMHC) that protect lenders in case of borrower default, conventional loans do not have these insurance requirements, providing borrowers with potentially lower overall costs.

The other choices indicate various types of mortgages that do not align with the conventional definition, such as those requiring insurance, government-backed loans, or loans specifically for property investments, which all fall outside of the conventional umbrella.