What type of loan is indicated when a client has a 20% down payment?

A loan characterized by a 20% down payment is typically classified as a conventional loan. Conventional loans are not insured or guaranteed by the government, which distinguishes them from government-backed loans. The 20% down payment is significant as it often allows the borrower to avoid private mortgage insurance (PMI), which is usually required when the down payment is less than 20%.

In this context, it’s important to note that a substantial down payment on a conventional loan indicates a lower risk for lenders, making these loans more favorable for both parties involved. This is in contrast to subprime loans, which are usually issued to borrowers with lower credit scores and often come with higher interest rates.

Additionally, adjustable-rate mortgages refer to loans where the interest rate can change over time based on market conditions, which does not inherently relate to the down payment amount. By having a 20% down payment, the client solidifies their position for a conventional loan rather than falling into categories that entail specific government backing or the adjustable nature of interest rates.