What You Should Look For In a Mortgage

Many people believe that a rite of passage into responsible adulthood includes the purchase of a first home. This major life purchase has long signified financial stability, maturity, and of course the always present idea of the 'American Dream'. There was a time when buying a house required a few years of saving for a decent down payment or even the whole value of the home. It was a time when credit was only given to the responsible individuals who had the money and in the bank's eyes, the money to pay them back sooner then later.

Fast forward to today and we live in a world where credit is readily available and the simple mortgage of days past, which was generally 30 years fixed with 20% down, has become a complex world of adjustable rate mortgages, interest only mortgages, reverse mortgages, and other mutations of what was once a simple agreement between a financially mature person and a financial institution. Nowadays most people can get a mortgage with as little as 2% down and choose from a slew of options such as a lower rate now, only paying the interest for a few years, and other ideas that even the most financially naive should shake their head at.

Of course many Americans have fallen into the trap of materialism and have it now mentality, which most lenders are happy to satisfy. But picking out a good mortgage on a home that you can actually afford isn't hard. It is important to avoid mortgage agreements that run over 30 years because that 30 years if you can't sell your home can seem like a prison sentence. You'll also want to avoid ARMs (adjustable rate mortgages) which offer a lower monthly payment (sometimes just the interest) for a few years before 'resetting' to the actual mortgage amount which can leave many families suddenly scrambling for money.

Also you'll want to be patient and shop around for the best deal. Not only will this pay off in terms of finding your affordable dream home, but it will also delay your big purchase and allow you to save accordingly for the down payment on the home. The 20% down payment was long honored in the past and it helped many people prepare for and be able to afford their mortgage over a period never longer then 30 years. You should aim for a minimum down payment of 20%, no lender or bank will ever turn away a person who is giving them 20% or more upfront in payment because that more then covers the risk of losing more on people who can't afford interest and payments later down the line.

Bottom line for those looking to move in:

• 20% minimum down payment. This is 20% of the current market value of the home that you'll be paying for.

• Aim for a 30 year mortgage, although the higher the percentage your down payment is, the shorter you can make your mortgage.

• Stay away from ARMs and interest only mortgages.

• Look for lower interest mortgages, these aren't credit card payments, these are home payments. Double digit interest rates are unacceptable as is anything over 8 percent.

• Plan ahead and pay for a house you want and can afford and you'll reap the benefits for years to come.