Final answer:
A conventional loan is a mortgage arranged solely between the borrower and the lender without adherence to the guidelines of government-sponsored enterprises.
Step-by-step explanation:
The term used to describe mortgage loans that are arranged entirely between the borrower and the lending institution without being sold in the secondary market or backed by a government agency is a conventional loan. These loans are essentially a contract between the lender and the borrower, and they do not conform to the guidelines set by government-sponsored enterprises like Fannie Mae or Freddie Mac.
In contrast, conforming loans must meet certain criteria to be eligible for purchase by these government entities, and they typically have size limits based on the location.
Conventional loans are not guaranteed or insured by any government agencies, such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the U.S. Department of Agriculture (USDA). They typically require a higher credit score and can have stricter guidelines compared to government-backed loans.