What is a key requirement for a conventional mortgage?

What is a key requirement for a conventional mortgage?

• A. A down payment of less than 10%
• B. An LTV exceeding 85%
• C. A minimum 20% down payment
• D. A fixed interest rate for the term

Answer: (C)

A key requirement for a conventional mortgage is a minimum 20% down payment. This is because conventional mortgages are not insured or guaranteed by a government entity, which usually means that lenders require a higher down payment to mitigate their risk. The rationale behind this is that a larger down payment generally reduces the lender's risk in case of default since the borrower has a greater equity stake in the property. This can provide more security for the lender and often leads to more favorable terms for the borrower. The other options focus on lower down payments or specific financial terms that do not align with the standard practices associated with conventional mortgages, emphasizing why the requirement for a 20% down payment stands out as essential in this context.

A key requirement for a conventional mortgage is a minimum 20% down payment. This is because conventional mortgages are not insured or guaranteed by a government entity, which usually means that lenders require a higher down payment to mitigate their risk. The rationale behind this is that a larger down payment generally reduces the lender's risk in case of default since the borrower has a greater equity stake in the property. This can provide more security for the lender and often leads to more favorable terms for the borrower.

The other options focus on lower down payments or specific financial terms that do not align with the standard practices associated with conventional mortgages, emphasizing why the requirement for a 20% down payment stands out as essential in this context.