Which statement about conventional loans is true?

• A. They are government backed loans
• B. They are non-government backed loans and have an LTVR of 80%
• C. They always require PMI regardless of LTVR
• D. They cannot be used for investor properties

Answer: (B)

The idea being tested is how conventional mortgages differ from government-backed loans and how loan-to-value interacts with private mortgage insurance. Conventional loans are not insured or guaranteed by a government agency; they’re provided by private lenders and can be conforming or non-conforming. A key rule tied to conventional loans is about private mortgage insurance: if the loan amount is more than 80% of the home’s value (LTV above 80%), lenders typically require PMI. When you reach an LTV of 80% or less (often by making a 20% down payment), PMI is usually not required.

So the statement that conventional loans are non-government backed fits, and it also aligns with the idea that the 80% LTV threshold governs whether PMI is needed. That combination makes it the best choice among the options.

The other statements conflict with established facts: government-backed loans exist, conventional loans don’t automatically require PMI at all LTVs, and conventional loans can be used for investment properties in many cases, so those points don’t describe conventional loans as accurately.