Today, finding the right financing for a home purchase is as important as finding the right house. The only certainty in the mortgage market is change -- and finding the financing package that best suits your needs can be a complicated process.

Remember that financing options are affected by local and regional real estate and banking practice and in some areas state law.

Fortunately, Brokers Network Real Estate can help you find the financing method that works for you from among the many types of financing available.

When you compare financial institutions, be sure to look for variations in the way mortgages are offered -- distinctions that can mean dollars of difference to you. Shop around and compare savings and loans, mortgage companies, commercial banks or credit unions. One mortgage will surely fit your needs.

This traditional, "tried-and-true" mortgage option is a loan with a constant interest rate and level, equal payments during a set period of time -- most commonly, 30 years. The biggest selling point of fixed-rate loans is predictability, and they are particularly suited to people with steady incomes.

If lower rates dictate the time is right to refinance, it's a good idea to compare the costs of incurring a new mortgage -- such as prepayment penalties and loan origination costs.

Adjustable-rate mortgages (ARMs), as the name implies, the interest rate on an adjustable-rate mortgage changes throughout the term to stay current with present interest rates. ARMs are most popular when rates are relatively high and appear to be dropping and when the difference between the ARM and the fixed rate is greater than 2 to 3 percent. Different lenders offer variations in the front end of their ARM plans, such as the points you pay or discounted initial rates.

To make a useful comparison of an ARM rate, consider the index upon which the rate is based, the margin or spread between that index and the rate paid, and the intervals at which the rate and payments are adjusted.

Index: The rate you pay is directly related to a particular interest-rate index.

Margin: Most lenders will offer ARMS that state a margin which is added to the index to get the rate upon which the payments are based.
Note: Always look at the index plus the margin when comparing ARMs. The larger the margin, the less likely the rate you pay will go down, even if interest rates drop.

Rate adjustment periods: With most ARMs, any periodic adjustment in the interest rate changes the payment. Adjustment periods tend to reflect the period of the index of the most popular ARMs; currently, annual adjustments are the most common.

Caps: As a safeguard against excessively high payment increases, some ARMs place a cap on the amount by which either the interest rate or payment may rise at any single adjustment, over the life of the loan, or both. Look at the cap as the "worst case scenario" to determine if the ARM suits your financial capabilities.

FHA-insured loans: Lenders offer FHA mortgages for as little as 3% down. FHA mortgages are also assumable. Downpayments are usually low.

VA-guaranteed loans: The Veterans Administration guarantees lenders against loss if a property is foreclosed due to default. These assumable loans are available to eligible veterans and may be used to buy, refinance, construct or repair a house.

Farmers Home Administration (FmHA) loans: The government makes these loans available to persons of "moderate" to "very low" income in rural or non-metropolitan areas.

Lease/purchase agreements: Borrowers can lock in the price of a house today and postpone financing for 12 to 18 months with these agreements. The borrower gives the seller a deposit which is applied to the purchase and makes monthly rental payments. Lease/purchase agreements are used by sellers who want to keep a home occupied and receive rental money after they've moved out, and by buyers who are not in a position to commit to a property at a particular time.

Installment contract: Buyers and sellers work out a contract which states a downpayment, interest rate, and term. Some contracts have long terms; others are short-term with balloon payments. Regulations about title transfer in a contract sale vary from state to state.

First mortgages from relatives or others: Sometimes relatives or private investors will purchase a home outright then offer a borrower a first mortgage. The terms are worked out to the mutual satisfaction of both parties.
Note: The Internal Revenue Service will impute higher rates on the lender for loans arranged with below-market rates.

Second mortgages: These are used when a borrower needs additional financing to buy a home. This mortgage may be financed by the seller, another lender, relative or investor, and terms are negotiated between buyer and lender. Often, second mortgages are used when a borrower assumes a guaranteed first mortgage with a lower interest rate and needs to make up the difference between the loan and the sale price.

Equity financing: An equity plan allows buyers to buy new homes by borrowing against a portion of the equity in their present home. A six-month "bridge" loan is secured on which no monthly payments are required and that money is used to purchase the new home. When the present home sells, the loan is paid off with the proceeds of the sale. If the home doesn't sell within six months, the owner may renew the loan or choose from other "back-up" options.