Looking for home mortgage loans can get confusing with the
alphabet soup of mortgage loans programs available today. Most
of these programs are just variations of fixed rate and
adjustable rate mortgage loans. These loans can be structured to
meet your financial needs, and most are available in 15 or
30-year terms. Your long-term plans play an important part in
selecting the right type of loan, use these general guidelines
to help you as you shop for home mortgage loans.

Fixed Rate Mortgage - If you're going to be staying in your home
for at least 7 years, consider a fixed rate. This loan's
interest rate is fixed for the life of the loan or term ' 15, 20
or 30 years. Usually the shorter the term, the lower the
interest rate. This type of loan is amortized ' both the
principle and the interest are paid off at the end of the loan
term.

Adjustable Rate Mortgage - If your only planning on living in
your home for a short period of time you may want to consider an
adjustable rate. Your interest rate can adjust ' up or down. The
rate is tied to an index like treasury bills or prime rates. The
initial rate usually starts out low, but can adjust after a set
period of time. If you choose this type of loan and then decide
to stay in your home, you may want to refinance after two years
to avoid any upward rate adjustments.

Combination Fixed and Adjustable - Going to be in your house for
just a few years? This type of home mortgage loan can start out
as a fixed rate for a set number of years, keeping your rate and
payments low, and then the loan adjusts. Like the adjustable
rate, the amount of the adjustment is tied to an index that can
go up or down. This loan is sometimes called a two-step or
convertible ARM. Just remember, these loans usually go up after
a set period of time, or if you have to convert after a few
years it can cost you money. Be sure you understand your loan
and when your payments could go up to avoid paying more than you
have to.

Balloon - An interest only loan. You would only want to use this
loan if you were only staying for a short time in your home.
Because you're only paying interest, and nothing towards the
principle, you don't build any equity. At the end of the loan
term, you have to pay the balance off all at once, but few
people ever keep these loans for the entire term.

Having an understanding of these basic types of loans and
combinations of them is the key to finding the mortgage loan
that is right for you.