by A.W. Berry

Created on: August 18, 2008   Last Updated: February 25, 2010

Knowing what to look for in a mortgage, how much to put down, and how long to pay it off can save up to thousands of dollars. Essentially, the greater the mortgage amount and interest rate, the higher the cost of the loan will be. However, deciding how much to put down and the term of the mortgage is also unique to the mortgage applicant as each applicants financial situation varies. In light of this, understanding your financial situation is important when deciding what to look for in a mortgage. For example, how much capital you have available can help 1) improve your chances of getting the loan, 2) determine which loans you can apply for and 3) how quickly the mortgage can be paid off.

Some things to look for in a mortgage loan include i) no pre-payment penalty, ii) no broker charge and junk fees, iii) a low fixed rate of interest, iv) seller safety requirements and v) preferable default resolution terms. These mortgage features may be found with the right financial institution which means shopping around and researching mortgage lenders can be helpful. However, these aspects of mortgages are not the only relevant considerations because in time, things like income level, family size, location of residence, property buying and selling decisions, and natural hazards can all potentially influence the decision of whether or not to pay off, refinance, or transfer a mortgage.

• Choosing a down-payment:

Since everyone's financial situation is different knowing how much to put down as collateral is a little subjective, but banks deal with this subjectivity with down payment minimums. Down payments less than 20% often require an additional mortgage insurance premium on top of the monthly mortgage amount so if this premium costs more than the additional collateral it may not be worth it to pay less than 20%. Other factors to consider are market conditions, if the property invested in is expected to rise in value at reasonable to good rate, then a higher mortgage down-payment may be a good idea as it can help minimize monthly mortgage payments and the interest on them. This additional money that could have been marked for mortgage payments can then be reinvested elsewhere.

• Low down-payment programs

For mortgage borrowers with less expendable capital, programs exist that offer lower down payment requirements and fixed interest rates. In the U.S. the Federal Housing Authority (FHA), and the U.S. Department of Housing and Urban Development (HUD), facilitate

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