Think you are ready to buy a house? The first step in any home buying plan should be to examine your financial situation and decide what you can afford and what type of mortgage you want. For those who don’t like to take risk and extend themselves in debt, you’ll want to find a short term note while others may feel comfortable taking financial risk because of good credit scores and strong assets.

Before you start shopping lenders and apply for a loan, you will need to have a serious one-on-one with yourself.  Only honest answers will work when you attempt to answer these important financial questions: 

•  How long do you plan to live in this house?
•  Do you want cash flow that allows you to make other investments?
•  Do you want a home to fix up or ready to move in?
•  Where do you see your life in 10 years?
•  Do you prefer being debt free over taking financial risks?

Once you have answered these questions, you will know what direction to start moving including what type of house and mortgage is best for you. Take your time and shop different lenders, no need to jump on the first loan that’s offered.  Review the options you have and chose the one that is best suited to you and your situation.

If you are comfortable and can afford financial risk, you will have better deals available in lower rates and longer pay-off terms such as a 30 year note. If your credit scores are good and you have strong assets, you can find lenders that won’t require a down payment. You may even be approved for a loan that is more than the appraisal value of the home. 

Your motto should be to live within your means and make sure you can pay the mortgage and your other bills comfortably. You will also be eligible for deductions on your federal income taxes that can help offset your overall debt.

If you are not the type to take financial risk and do everything you can to stay debt free, a short term loan may be best for you. You will likely need to make a larger down payment and make extra payments to bring that payoff sooner, but the theory of living conservatively and being able to handle the unexpected things life brings easier may be what’s best for you.

Regardless of which theory applies to you, here are some points to consider that can help you decide which loan is best for you:

•  Pay for points in order to get a lower interest rate
•  Take a higher rate to keep closing cost low
•  Shop your local and national lenders
•  Use the mortgage calculators and tools your real estate agent has available
•  Find flexibility in loan features that make it comfortable for you
•  Remember extra cost such as taxes and insurance
•  Ask your chosen lender about alternative loan terms like 20 year notes

In the end of all the decision making and shopping, your main goal is to have found a house that is one you want to live in and can afford. You don’t want to end up in a home that is uncomfortable or destroys your financial future.