Shopping for a mortgage is fraught with questions, concerns and worry. Traditional Fixed Rate Mortgage? Graduated-Payment Mortgage? Adjustable Rate Mortgage? FHA Mortgage? Two-Step Mortgage?
It's important to wonder what's best and to find that out, but remember to  finalize your decision on what's best for you. Deciding which type of mortgage will best fulfill your needs can be difficult. There are so many types of loans and different term lengths. Your choice is extremely important and can take some time and effort to research. While often neglected by homebuyers, a little research before choosing your mortgage can save you thousands of dollars in the long run.
There are several elements to borrowing that should be carefully considered. You must weigh each separately and collectively. Before making that last call, consider the following.
How long do I plan to stay in this home?
Five years? Ten years? Thirty years? The length of time you stay in one place will certainly play a part in determining which loan suits you. If you only plan to be in the home for 5-7 years or less, you should seriously consider an adjustable rate mortage. If you intend on staying 20-30 years, a fixed rate mortgage may be right for you.
How much risk am I willing to accept?
If you need to know exactly what you'll be paying each month for the term of the mortgage, a fixed rate mortgage is a good move. The fixed rate loan, however, will also net a higher interest rate and high interest paid over time. If you're willing to risk some fluctuations in the rate, you may be able to secure a lower interest rate and look forward to paying less overall.
What are my income expectations?
Plan for the future. Do you anticipate a gradual or dramatic increase in your income in the next few years? If you expect your pay scale to climb steadily over a period of time, a graduated payment mortgage may be your best bet and can also give you added assurance that you'll be paying off your home sooner than later. If you expect a dramatic pay increase soon, talk to your lender about how best to apply it sensibly.
How much cash do I have available for upfront costs?
If you have the resources, you may want to make a larger down payment to lower your monthly out-go. This is usually the desired route for those who aren't as concerned with paying off a mortgage in fewer years than the note allows and who would rather spend less money per month on housing and more on vacations or other quality of life items. A homeowner who wants to live his later years debt-free however, considers more thoroughly that keeping a higher monthly payment will free him of his obligation sooner and will, overall, lessen the interest paid.
Keep in mind that you'll have closing costs and fees to pay in addition to your down payment. If you don't have much cash saved for your upfront costs, don't write yourself off. Adjustable rate mortgages, or ARMs, allow for both a higher and lower monthly payment, as well as a higher or lower down payment, depending on your circumstances and comfort zone.
All of these factor in and add up to choosing the right lender. Your agent will be able to give you advice on where to find a lender who can give you the best information and then help you feel comfortable with that choice.
HERE ARE OTHER THINGS TO CONSIDER...
Annual Percentage Rate (APR)
This is most likely the best way to make an "apples-to-apples" comparison of lenders. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.
Interest Rate
Find out the rate the lender will commit to and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn't in writing, it doesn't exist.
Points and Fees
These factors will vary greatly. Look out for hidden fees. Make sure the lenders disclose all fees; ask what they charge and what is included and what is not.
Loan Approval
Both approval and funding time should be considered. You don't want to lose a prospective home because your lender takes weeks to process or fund your loan. A lender should be able to fund the loan within ten to twenty days.
Lender Reputation
Don't rely soley on someone else's recommendation. You, not your friend or relative, must feel comfortable with your lender. If you do feel good about your lender and trust him or her, it will be much easier to trust his or her advice on what kind of mortgage will net you the best results.
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