• A conventional mortgage is a type of home loan that is issued, underwritten, and guaranteed by Fannie Mae and Freddie Mac. This is the most common type of non-government mortgage available in the United States today. It requires a minimum down payment of five percent and a minimum credit score of 620 and above for a borrower to qualify for this type of a mortgage debt.
  
  

Fixed Rate

• The most common type of a conventional mortgage is a 30 year fixed rate mortgage. This means that the monthly interest rate of the mortgage does not vary at any point during the 30 year term of the loan. It is considered to be the least risky option when making a mortgage decision.
  
  

Variable Rate

• A variable rate conventional mortgage has a fixed rate for a set term and then once that term ends, the rate can and will adjust at predetermined intervals throughout the life of the loan. The initial rate on a variable rate, or Adjustable Rate Mortgage (ARM), is usually lower than a fixed rate mortgage, making this option attractive to borrowers. However, with the variations in rate in the long term, most borrowers refinance the mortgage once the original fixed rate term has expired.
  
  

Interest-Only Payments

• Traditionally, most mortgage payments are made with a principal and interest payment. This type of payment, however, only pays off the accumulated interest but does not reduce the principal of the mortgage. These conventional loans tend to have a period of five to seven years of interest-only payments, and then the payments either shift to a principal plus interest payment, or a large lump sum principal reduction payment is due.