What defines a "conventional loan"?

A conventional loan is characterized as a mortgage that is not backed by a government agency, such as the FHA or VA. Instead, it is typically a private loan that meets the guidelines set by entities like Fannie Mae or Freddie Mac, which focus on certain credit and income standards. This definition is significant because conventional loans are often used for purchasing homes and can be either conforming or non-conforming. Conforming loans adhere to the maximum loan limits and underwriting requirements established by Fannie Mae and Freddie Mac, which makes them more liquid in the secondary mortgage market.

The other options don't accurately capture the nature of a conventional loan. For instance, loans backed by government agencies are classified differently, as they provide different borrowing benefits and requirements. Additionally, a loan not suitable for a secondary market sale does not specifically define a conventional loan, as many conventional loans are indeed eligible for resale in that market. Finally, while a loan with a fixed interest rate for 30 years can describe many conventional loans, it does not encompass the definition of a conventional loan in general, since conventional loans may also come with adjustable-rate structures.