The correct answer is unconventional loan. Unconventional loans are typically backed by federal agencies, such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the United States Department of Agriculture (USDA). These agencies provide insurance or guarantees that reduce the risk for lenders, making it easier for borrowers to qualify for loans, especially those who may have lower credit scores or less financial stability.
In contrast, conventional loans are not backed by any government agency; they are generally offered by private lenders and have stricter eligibility requirements. Subprime loans also do not fall under federal agency underwriting and are designed for borrowers with poor credit histories. Private loans are typically personal loans provided by private lenders without governmental backing. Therefore, the distinguishing feature of unconventional loans is that they receive support from federal government programs, making them vital for many homebuyers who need assistance in securing financing.