Undoubtedly as a first time home buyer you have been overwhelmed by commercials, mailers, and more facts than you would need to write a book. Now that you have found the house of your dream what's next?

To analyze the loan types it is important to know what they do and then decide which type meets your immediate needs and will serve you well in the future. It is important to consider your future income when deciding which loan to choose. Although no one can say what will happen tomorrow, proper planning will insure that the loan you secured for your dream home doesn't turn into a nightmare.

Fixed Rate Mortgage This is your parent's mortgage. Prior to the internet when most people stayed at the same job until retirement and families weren't as mobile as today this loan was the personification of stability. In this loan the interest rates and payments stay the same for the term of the loan.

Balloon Mortgages always seem attractive in the beginning. Theses loans generally offer a fixed rate for several years. At the end of the fixed rate portion of the loan, payment is due in full. If at the end of the loan you are unable to pay you have few options. You can refinance but you will be subject to current interest rates or you may find yourself in default.

The Two Step Mortgage also offers initial benefits, such as the payment generally remains the same for the first five years. The good news is at the end of the first five years there is a conversion option that adjusts based on the current interest rates and the payment amount will then be fixed for the remainder of the loan. This loan also can be based on seven years instead of five.

The 5/5 & 5/1 Adjustable Mortgage again offers a stable payment and interest rate for the first five years. In the sixth year the interest rates and therefore the payments are adjusted every five years for the 5/5 arm and every year for the 5/1 arm.

Using your current circumstances and evaluating your options in five, seven, or even ten years if nothing changed is probably a safe bet when choosing a loan. Of course there are professionals available to help you estimate, assess and ultimately decide which loan is right for you. This is a big decision so; never underestimate the power of knowledge or research

Learn more about this author, Analise Kaufman Alsbrooks.
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