What defines a conventional mortgage?

A conventional mortgage is characterized by its lack of government backing, meaning it is not insured or guaranteed by federal entities such as the FHA, VA, or USDA. This type of mortgage typically adheres to guidelines set by Fannie Mae and Freddie Mac, which are government-sponsored enterprises that provide liquidity to the mortgage market. Borrowers seeking conventional mortgages usually must meet stricter credit and income requirements compared to those applying for government-backed loans, as there is no federal insurance to mitigate risk for lenders.

The other options describe various types of mortgages but do not align with the definition of a conventional mortgage. For instance, federally insured mortgages provide protection to lenders, which is contrary to the definition of a conventional mortgage. Similarly, mortgages that are specifically aimed at first-time buyers or are government-backed are different from conventional loans, which can be available to a broader range of borrowers, including experienced homeowners.