No bells, whistles, or fine print here. A conventional mortgage is a standard loan that isn’t backed by the Federal Housing Administration (FHA). It’s the most straightforward type of loan that gives you the money you need to buy a house, which is paid back over the life of the loan, usually during 15, 20, or 30 years.
If you’re the type of person who values stability, you’ll probably want a fixed-rate mortgage. It ensures that your mortgage payments will remain the same throughout the life of the loan, no matter how market conditions change. You’ll essentially “lock in” whatever interest rate your lender offers when you sign on your loan, and you’ll keep that interest rate until your loan is paid in full. If interest rates fall drastically, you may even be able to refinance your mortgage at a lower rate (as long as you’re willing to pay loan costs again).
Interest rates pretty much change daily, and if you're willing to assume some of the risk, an adjustable-rate mortgage could result in lower interest costs. It’s a mortgage that is subject to market conditions and the interest rates set by the Federal Reserve. If interest rates fall, you’ll owe less each month. If interest rates rise, so does your monthly payment.
If you need a mortgage but your credit score isn’t high enough to qualify for a conventional loan, you might be able to get a government-insured loan. It’s basically where the FHA promises to pay back your lender if you default, which reduces some of the risks to your bank. In exchange, they loosen some of the credit requirements so individuals with lower scores can qualify. It’s also a good option if you have less cash on hand for a down payment, since you can qualify with as little as 3.5 percent down.