Define "conventional loan."

A conventional loan is indeed defined as a mortgage that is not backed by the government, distinguishing it from loans that have government guarantees, such as those insured by the Federal Housing Administration (FHA). This type of loan typically has stricter requirements, often necessitating higher credit scores and larger down payments compared to government-backed loans. Because conventional loans carry more risk for lenders, they prioritize borrowers who demonstrate strong creditworthiness and financial stability.

The other options describe different types of loans or conditions that do not apply to conventional loans. For instance, FHA loans involve government insurance to protect the lender in case of default, while some loans are specifically tailored for first-time homebuyers with benefits that conventional loans may not offer. Additionally, there are loans with particular refinancing terms that can include penalties, but this characteristic does not define a conventional loan. Understanding that conventional loans are primarily characterized by their lack of government backing highlights their unique role in the mortgage market.