Choosing the type of Mortgage:

Fixed Rate Mortgage. Plan into getting a fixed rate mortgage is you are planning to stay in your home 10 or more years. With a Fixed Rate Mortgage your payments will be the same throughout the life of the loan.

Adjustable Rate Mortgage (ARM). If you are planning to sell your home within the next 10 years, you might want to look at an ARM. The payments during the initial period of an ARM are the same since the initial period is always a fixed rate. ARMs are available with initial periods of 1 to 7 years. Usually, ARMS offer a lower rate than a fixed rate mortgage during the initial period.

The Mortgage Term: 15 or 30 years

A 30 year term allows you to have a lower monthly payment than a 15 year term. This helps you in several ways, but mainly, it allows you to afford a more expensive house.

A 15 year term allows you to pay off your home in half the time and will save you in interest payments over the life of the loan. In addition, 15 year mortgage have lower rates.

Renting vs. Owning.

Your cost of owning a home may be lower than renting because the interest on a mortgage is tax deductible. This lowers your tax bill. Consult a tax advisor for more details on how you can save by owning your home. However, an even greater benefit will be that you will be building equity in your home.

Deciding to Buy a Home: Where to start.

The first thing you should do is look a how much money you have available for down payment and closing costs. This will determine several things including how much you can borrow, the programs you qualify for, and what houses to look at.

Once you determine how much money you have, you should look into prequalifying for a mortgage as this will show you things with the correct perspective. A loan officer can let you know what programs are available and up to how much you can borrow. Prequalifying is a very simple process and can be done online in only a few minutes.

Note: It used to be that the down payment for a house was the biggest hurdle to overcome when buying a home, but today, with so many programs requiring 5% and even no down payment, that hurdle has been removed and owning a home has become very encouraging.

Realtor and Builder Referrals.

There are several reasons why real estate agents and builders make recommendations.

One reason agents and builders make suggestions is because they want to recommend someone reliable. Reliability is important to you, so that you don't end up with a horror story to tell. Reliability is also important to the seller, the agents, and everyone involved in your transaction because if the deal doesn't close, everyone walks away with nothing.

However, because this is "captured business," sometimes these lenders don't have as much incentive to offer you great deals or lower rates. Never automatically disqualify a recommended lender, but be sure to be ask questions about the relationships between the lending company and your builder or real estate agent's company. If your agent or builder makes a suggestion for a lender, be sure to talk to that lender and do comparison shopping.