• Mortgage term. Mortgages are generally available
at 15-, 20-, or 30-year terms. The longer the term,
the lower the monthly payment if the same amount
is borrowed. However, you pay more interest overall
if you borrow for a longer term.

• Fixed or adjustable interest rates. A fixed rate
allows you to lock in a low rate for as long as you
hold the mortgage and is usually a good choice if
interest rates are low. An adjustable-rate mortgage
is designed so that interest rates will rise as
interest rates increase; however they usually offer a
lower rate in the first years of the mortgage. ARMs
also usually have a limit as to how much the interest
rate can be increased and how frequently they can be
raised. ARMs are a good choice when interest rates
are high or when you expect your income to grow
significantly in the coming years.

• Balloon mortgages offer very low interest rates for
a short period of time—often three to seven years.
Payments usually cover only the interest, so the
principal owed is not reduced. However, this type
of loan may be a good choice if you think you will
sell your home in a few years.

• Government-backed loans, sponsored by agencies
such as the Federal Housing Administration
(www.fha.gov) or the Department of Veterans
Affairs (www.va.gov), offer special terms, including
lower downpayments or reduced interest rates—to
qualified buyers.

Slight variations in interest rates, loan amounts, and
terms can significantly affect your monthly payment.

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