What is one common characteristic of conventional loans?

Conventional loans are primarily characterized by their often stricter qualifying criteria compared to government-backed loans such as FHA or VA loans. These stricter criteria can include a higher credit score requirement, a lower debt-to-income ratio, and a more thorough verification of the borrower's financial history. This thorough assessment is designed to minimize risk for lenders since conventional loans are not guaranteed or insured by any government agency.

Conventional loans may also allow for a range of varying terms and conditions, but the distinguishing factor remains their nuanced and potentially more rigorous qualifying conditions which can make them more selective in who is approved for funding. Understanding these characteristics is crucial for both prospective borrowers and mortgage professionals, as they influence the loan's accessibility and structure.