Which of the following is NOT a characteristic of a conventional loan?

A conventional loan is defined by several key characteristics that distinguish it from other types of loans, such as government-backed loans. One of the primary characteristics is that it is not insured or guaranteed by a government entity, which aligns with the first choice. This means that the risk is borne solely by the lender, making the borrower's credit worthiness and ability to repay the key factors in approving the loan.

The statement regarding security resting on the borrower's ability to pay highlights that conventional loans are heavily reliant on the borrower's financial profile. The lender assesses factors such as credit score, income stability, and debt-to-income ratio to determine the loan's risk.

Regarding loan-to-value ratios, it's common that conventional loans do not exceed 80% without requiring private mortgage insurance, which serves to protect lenders in case of borrower default. If a borrower wants to finance more than 80% of the property's value, they usually need to procure mortgage insurance to mitigate the lender's risk.

The assertion that a conventional loan is never insured by a private agency is not accurate. In fact, many conventional loans can be secured with private mortgage insurance if they exceed certain loan-to-value thresholds. This provides a safety net for lenders, thus making conventional loans versatile in nature,