University of Central Florida (UCF) REE3043 Fundamentals of Real Estate Practice Exam 4

In the context of conventional loans, one of the primary characteristics is that they often do not require mortgage insurance if the borrower provides a sufficient down payment, typically 20% or more. This aspect allows borrowers to avoid the additional cost of mortgage insurance, which is a benefit but not a requirement of conventional loans.

However, while it may be true that many conventional loans are structured without mortgage insurance, it is not an essential requirement that defines what a conventional loan is, unlike the other options listed. The size limit of $417,000, which is based on conforming loan limits set by Fannie Mae and Freddie Mac, is a specific requirement for those conventional loans that conform to those agencies' standards. Specific underwriting criteria establish the conditions under which the loan will be approved, such as credit scores, income verification, and debt-to-income ratios. Lastly, the interest rate advantage refers to the competitive rates often associated with conventional loans, particularly for those with good credit, making these terms a standard element of such financing options.

In summary, while many conventional loans may come without mortgage insurance, it is not a defining requirement, making it the correct choice in this scenario.