What is the main distinction of a conventional loan compared to other types of loans?

The main distinction of a conventional loan lies in its lack of insurance or guarantees from government entities. Conventional loans are typically offered by private lenders without federal backing, meaning they are not insured by the FHA or guaranteed by agencies like the USDA or VA. This characteristic allows for various terms and conditions set by lenders, but it inherently involves more risk compared to government-backed loans.

Government-insured loans, such as those backed by the FHA, provide additional security to lenders, which can result in lower down payments and more flexible credit standards. This is not the case with conventional loans, making option C the correct choice.

While it is true that some conventional loans may require a higher down payment compared to certain government-backed options, this is not a defining characteristic; rather, it's dependent on the specific loan terms and the borrower's financial profile. Therefore, the lack of government insurance is the key distinguishing feature of conventional loans.