Mortgages
If you are in the market for a new home, choosing the house is only half the battle. The next step will be to select a mortgage that will fit your financial situation. It used to be that mortgages were limited to a 30-year fixed rate loan. Today, there is a wide array of mortgages available that will allow you to finance just about any home that you might find. However, just because you can finance a home doesn’t mean that the house and mortgage you choose are the most responsible for your family. You need to educate yourself not only about the different types of mortgages that are available, but also about the risks that come with some of them.

Fixed-Rate Loans
This is the traditional type of mortgage that offers a fixed interest rate for the life of the loan and usually comes with a 15-30 year term.  The upside of these types of mortgages is their stability, since you will pay the exact same amount every month throughout the life of the loan. The downside is that fixed-rate loans will come with a higher interest rate at the beginning than some of the other options available. However, for financial stability, a fixed-rate loan is the way to go.

Adjustable-Rate Loans
Another popular type of load is the adjustable rate mortgage, or ARM. These loans begin with an interest rate much lower than fixed-rate loans, but the rate can fluctuate during the life of the loan. This is good news when interest rates drop, but not so good when they begin to rise. If you are not planning in remaining in your home for more than a few years, an ARM may be the best and cheapest way to go.

Balloon Mortgages
A balloon mortgage begins like a fixed-rate loan, but with a much lower rate. While this may seem like the best choice in a mortgage, the catch is that the mortgage will become due in full at the end of the term, which is generally a period of seven to ten years. Although you will have the option of refinancing your balloon mortgage prior to the due date, you don't know what the market will look like. You may be stuck with a high interest rate for the remainder of your mortgage if you are not careful!

Option ARM's
These mortgages are the most risky by far. This type of mortgage combines an adjustable rate with a payment option that works best for you. This may mean that you make payments of both interest and principle, or you can opt to make interest-only payments. In the case of interest-only payments, you are not building any equity in the house. When the time comes to sell, you may actually have to write a check to cover the difference between the purchase price and the amount due on your mortgage. For most people, the option ARM is a bad deal all around.

There are many types of mortgages available today, which is why it pays to shop around for the best financing option for you. By selecting a home and a mortgage that you can afford, you are contributing to your financial security while enjoying the home of your dreams.