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Types of Mortgage Loans

Shopping for the lowest available interest rate is time-consuming but it save you thousands of dollars over the term of your loan. You can keep track of rates very easily by visiting sites on the Internet or signing up for a rate watch service. Comparing the rates requires an analysis of fixed mortgages versus the adjustable rate mortgages.

BUYER'S TIP: Don't just shop for rates when you compare mortgages.  Some of the lenders who offer the really low rates charge exorbitant fees or points to get those low rates.  Get information about the whole loan package so that you can compare apples to apples.  Remember that rates are generally very competitive among mortgage lenders so you can take advantage of companies that also have a reputation of providing excellent service.

Fixed rate mortgages charge the same interest rate during the life of the loan, which is commonly 15, 20 or 30 years. If you want your rate and payment to remain constant over a long period of time and you plan to stay in the house for a long period of time, a fixed rate loan may be the best option for you.

Adjustable rate mortgages (ARMs) charge lower initial interest rates than fixed rate mortgages and payments can go up or down, depending on the index used by the lending institution. Fixed rate and adjustable rate mortgages are commonly referred to as "conventional" mortgages.

Home buyers can also choose mortgages offered by the Federal Housing Administration (FHA) or the Veterans Administration (VA). To pick the best product, home buyers need to take into consideration the following:

• the down payment they plan to use
• their income and future job employment prospects
• timing of the Closing
• the type and condition of the property.