### What is a key feature of a conventional loan? - [ ] They have variable interest rates. - [x] They come with a fixed interest rate. - [ ] They require no down payment. - [ ] They don't require a credit score to qualify. > **Explanation:** Conventional loans generally come with a fixed interest rate, allowing borrowers to have predictable monthly payments. They differ from other loans that may have variable or adjustable interest rates. ### What is the typical term length for a conventional loan? - [ ] 5 or 10 years - [ ] 10 or 20 years - [x] 15 or 30 years - [ ] 20 or 40 years > **Explanation:** Conventional loans usually have terms of 15 or 30 years. These lengths provide borrowers with options on how long they will take to repay the loan. ### On what basis do borrowers qualify for a conventional loan? - [ ] Personal character references - [ ] Job stability - [x] Credit score and overall financial situation - [ ] Age and marital status > **Explanation:** Borrowers qualify for conventional loans based on their credit score and overall financial situation. Lenders evaluate these factors to determine if the borrower is eligible for the loan and can meet the repayment terms. ### What distinguishes a conventional loan from an unconventional loan? - [ ] Flexible repayment plans. - [x] Strict eligibility requirements. - [ ] Lower interest rates. - [ ] Faster approval times. > **Explanation:** Conventional loans have strict eligibility requirements and offer little leeway for borrowers who don't meet these criteria. This is in contrast to unconventional loans, which may have more relaxed requirements. ### What debt-to-income ratio is typically not allowed for conventional loan applicants? - [ ] Above 20 percent - [ ] Above 30 percent - [x] Above 40 percent - [ ] Above 50 percent > **Explanation:** Conventional loans usually require a debt-to-income ratio not exceeding 40 percent. This ensures that the borrower has adequate income to cover the loan payments in addition to their other financial obligations. ### What is the usual down payment requirement for a conventional loan? - [ ] 5 percent - [ ] 10 percent - [x] 20 percent - [ ] No down payment required > **Explanation:** A conventional loan typically requires a down payment of at least 20 percent. This substantial initial payment reduces the lender's risk and increases the borrower's equity in the property from the outset. ### Who evaluates the borrower's financial situation for a conventional loan? - [ ] Financial advisors - [ ] The real estate agent - [ ] Mortgage brokers - [x] Loan underwriters > **Explanation:** A loan underwriter evaluates the borrower’s financial situation to determine their eligibility for a conventional loan. The underwriter assesses factors such as credit score, debt levels, and savings. ### If a borrower's debt-to-income ratio is too high for a conventional loan, what might they need to do to qualify? - [x] Lower their debt level - [ ] Change employment - [ ] Increase the loan amount - [ ] Add a co-signer > **Explanation:** To qualify for a conventional loan, a borrower with a high debt-to-income ratio might need to lower their debt level. This improves their financial profile, making them a more suitable candidate for the loan. ### What governs the majority of terms for conventional loans? - [ ] State laws - [ ] Federal laws - [ ] Borrower's personal references - [x] Requirements of the lending institution > **Explanation:** The majority of terms for conventional loans are governed by the requirements of the lending institution. While federal and state laws play a role, individual lenders set specific criteria regarding eligibility and repayment terms. ### In what situation will a borrower have a higher probability of being approved for a conventional loan? - [ ] Having a significant amount of debt - [ ] Minimal savings - [x] Lower debt level and increased savings - [ ] Unstable employment history > **Explanation:** Borrowers with lower debt levels and increased savings have a higher probability of being approved for a conventional loan. These factors indicate financial stability and a greater capacity to meet the loan repayment requirements. ### Which of these is generally NOT included in the requirement for a conventional loan? - [ ] Fixed interest rate - [ ] Specific credit score - [ ] Defined down payment - [x] Zero down payment options > **Explanation:** Conventional loans typically do not include zero down payment options. A defined down payment, often around 20%, is required. ### Is there any leeway for unqualified borrowers in conventional loans? - [ ] There is significant leeway - [x] There is little leeway - [ ] Only if the borrower has a co-signer - [ ] Through negotiation > **Explanation:** There is little to no leeway for unqualified borrowers when it comes to conventional loans. These loans have strict criteria and do not make allowances for those who do not meet the requirements. ### Which entity primarily determines the qualification criteria for conventional loans? - [ ] Government housing agencies - [ ] Independent mortgage brokers - [x] Private lending institutions - [ ] Regional financial authorities > **Explanation:** Private lending institutions primarily determine the qualification criteria for conventional loans. While adhering to certain regulations, they set specific borrower eligibility requirements based on risk and other factors. ### How does one typically improve their chance of getting approved for a conventional loan? - [ ] Increase number of credit cards - [ ] Limit communication with lender - [x] Improve credit score - [ ] Opt for lower annual income > **Explanation:** Improving one’s credit score is a commonly effective way to increase the chance of getting approved for a conventional loan, as it indicates reliable and responsible credit management to the lender. ### Why might conventional loans be preferable for some borrowers over government-backed loans? - [ ] Easier to qualify for - [ ] Requires lower down payments - [ ] Better suited for borrowers with low credit scores - [x] Often have fewer restrictions on the property and loan amounts > **Explanation:** Conventional loans often have fewer restrictions on the property types and loan amounts, making them preferable for some borrowers compared to government-backed loans like FHA or VA loans.