Mortgages

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You can go to any number of sources for a mortgage: banks, mortgage companies, insurance companies, private investors, or even pension plans. How you structure your mortgage, and what rate of interest you pay are almost infinitely flexible as well. And no one is surprised if you roll over your mortgage every few years; staying in one place for 30 years is a thing of the past in our increasingly mobile society.

Even paying off your mortgage isn't regarded in the same light today. Most, if not all of your mortgage interest payments are deductible, so hanging onto a mortgage lowers your taxes.

The type of mortgage you seek will depend on a number of factors. If you are a qualified veteran of the armed forces, you may be able to obtain a 0% down payment loan. Other loan programs require as little as 3% down, with standard loans available with 5, 10, 20% or more down. Your agent can often help you determine the best loan for you and will recommend that you get "pre-approved" for a specified loan amount.

You can save yourself thousands of dollars by taking the time to explore all the possible mortgage plans for which you may qualify.

After you know how much you can afford to pay, choosing a mortgage plan is the next stop. There are dozens of loan possibilities out there. Following are just a few of the options you can consider:

Traditional Fixed Rate Loans
Usually carried for 30 years, its virtue is that the payment rate always stays the same. When you budget, that unchanging sum is something you can count on. Still the most popular type.

Adjustable Rate Loans
ARMs, as they're known, can save you quite a bit of money. You pay less initially, often as much as two or three percent less than the going mortgage rate. But later, if interest rates increase, so does your payment. There are also ARMs that build increases into your loan no matter what happens to mortgage rates. First-year payments may be low, but they increase (or "balloon") regularly.

Fifteen-Year Mortgage
A 15-year payout can save you thousands of dollars in interest. The drawback, of course, is that your monthly payments will be a lot larger. Ask yourself if the tax benefits you lose will be really worth it.

FHA and VA Loans
You don't apply directly for Federal Housing Administration and Veterans Administration government-backed loans. You go through your lender, who will tell you if you qualify. Both types allow you very low down payments or, in the case of VA loans, no down payment at all. Your real estate agent can tell if you, and the property you want to buy, fit the criteria.

Owner Financing/Contract for Deed
Sometimes the property owner will be willing to take back all or part of the mortgage. Generally, owner financing will be at a rate higher than average, and it won't last for long - two or three years is common. The balance of the note, known as a balloon, has to be paid off in full when it comes due. If you get owner financing, try for the longest possible term and be certain you can switch over to a bank or mortgage lender.

With the variety and complexity of loan packages available you might want to use a mortgage professional. Mortgage professionals line up the kind of financing that best fits your financial profile.

When you choose the kind of loan you want and fill out an application for the lender, expect to pay a few up-front fees. Sometimes the application fee will include an appraisal fee and a credit report fee.

Because loan approval is based in part on your credit history, try to make it look as good as possible before the credit check. Lenders generally believe you can afford only 36 percent of your income tied up in debt payments, and that includes your housing payment. So, if your mortgage insurance and tax payment is going to eat up 28 percent of your gross income, that only leaves eight percent for other debt. Try to get your credit card bills down, and put as much cash money as you can come up with, even temporarily, in your bank accounts.

Make sure you can contribute your part of the paper trail before you set out. Expect to be asked for two or three years of income tax returns. If you own your own business, or have income outside of your job, you'll probably have to supply a financial statement.

Now, prepare to spend from 2-4 weeks locking up your mortgage. It can seem like a long process, but of course, it's going to be worth it the moment you become a homeowner.