Are you planning on buying your first home? Have you thought about how your going to pay for it? Most of our fantasies about homeownership don't include home financing options. But you will have to make those choices. Buying a home is a process. The more you know about the process, the better decision you will make and the more money you will save.

Loans are categorized as conventional or government - issued. Unlike government - issued loans, conventional loans do not carry FHA (federal housing administration) insurance or VA (Veterans Affairs) guarantee. So those who borrow conventional loans will be required to pay for private mortgage insurance (PMI) if the loan is more than 80 percent of the purchase price. Government issued loans include:

The federal housing administration (FHA) issued some mortgage loans so that more lenders are more willing to make loans to borrowers who might not qualify for conventional loans because of the credit history or because of should the high debt to income ratios. With page FHA: insured loan, a home buyer can make a down payment of as little as three percent. The FHA charges the borrower an up-front mortgage insurance premium fee plus a monthly charge on all loans.

through the department of Veterans Affairs guaranteed loan programs, qualified U.S. Veterans, active service members and reservists can take out home loans without making a down payment. VA loan guidelines are more flexible than conventional and FHA loan guidelines. Or you make choose form the following types of conventional loans to finance your new home:

With this loan type, the interest rates stays the same throughout the life of the loan, and the monthly payments do not change. These mortgages offer homebuyers a sense of security. But, they do not allow homeowners to take advantage of dropping interest rates, unless the homeowners choose to refinance. Homebuyers usually agreed to repay fixed mortgages within 15 or 30 years. By repaying the loan and 30 years, homeowners benefit with lower monthly payments. But it also takes them longer to build equity. Housing industry experts recommend 30 - year mortgages for buyers planning to stay and their homes for several years. A 15-year mortgage yields higher monthly payments but faster growing equity. So those home buyers planning to sell their houses in a few years might benefit from 15-year fixed-rate mortgages.

The interest rates on these loans can change, so monthly payments can change as well. But most ARM's have caps to regulate the amount of interest rate that the loan can increase or decrease, regulating interest rates adjustments in any significant adjustment and across the life of the loan. Interest rates are usually lower for ARM's then for fixed rate loans for the first few years. So ARM's allow buyers to purchase more expensive homes then they could with fixed rate mortgages.

These loans can either work like fixed or adjustable-rate mortgages for the first several years. But once that agreed upon time ends, the borrower owes one large payment - sometimes the remaining balance all the loan. Housing industry experts recommend them to buyers who planned to sell their homes within a few years and can pay off the "balloon payment" with proceeds from the sale all of their home or by refinancing to a longer term loan.

When selecting your loans, considered interest rates, monthly payments, closing cost, down payment requirements, overall cost and fees. With an ARM, bear in mind how often the rates adjusted, how much they adjust, and caps.

Borrower money from a lending institution, otherwise known as taking out a mortgage. This is the most common way to refinance a home purchased.

Sometimes in the seller is willing to finance the purchase. This saves of buyer from having to take out a mortgage. The buyer makes a monthly payment to the seller, and the seller passes that payment on to the mortgage company. Or, if the seller is no longer making a mortgage payment on the property, he or she simply accept a down payment followed by monthly payments from the buyer. In essence, the seller is also the lender.

Buyers who lack funds for a down payment should look for lease-option or lease-purchase agreement. With a lease-option, the potential buyer leases the home for a specified amount of time, usually 12 to 24 months, after which he or she has the option to buy the home at a price agreed upon during the lease term. With the lease-purchased option, the prospective home buyer leases the property for and agreed upon amount of time and is obligated to purchase the property when the lease expires. Lease-option and lease-purchased tenants may have to pay above-market rate, but, in return, they received monthly rent credits that can serve as part of the down payment if they decided to buy the home.

This option will only applied to a few of you. But if you have that much cash, use it. You may save money by paying with cash. Most homebuyers take out a mortgage. The loan process involves choosing a lender, completing an application, getting the loan approval, and conducting the closing. Some homebuyers make the process easier by getting pre-qualified for a mortgage before the shops seriously for a new home. It is a good idea to arranger your finances before you hit the market. Its this disappointing to find a house, loved it and then discover it is out of your price range. know ahead of time how much you can spend. And, most importantly, pre-approval put you in a good bargaining position. Seller who must choose between two buyers -one not yet qualified and the other pre-approved-usually go for the " sure thing." Understanding the difference between pre- approval and pre-qualification. You are not pre-approved for a loan without written certification. Housing industry experts specially recommended pre-approval for first-time buyers, self-employed individuals, and home sellers who may need to move quickly once their homes sell.