Buying a home on loan has become comparatively easy. Apart from banks, there are many mortgage companies who are willing to finance your home at competitive rates. Having said this, the process may not be as simple as it sounds. It can be confusing, not to mention the high interest rates you might end up paying if you havent got your priorities and facts right.

Borrowing heavily is never a feasible option. So settle for a house that is within your budget. This means that you should keep in mind the amount of down payment and also the monthly payments that youll have to make for a number of years. So, first and foremost, you must be realistic about what you can afford. The traditional rule is that your monthly payment should not exceed 29% of your household income.

The next step is to search for an ideal locality, where you can buy a home within your budget. Here, you also need to consider factors like schools for your children, traffic volume and the distance from your workplace. Going through the various classified advertisements in the newspapers can save you driving down various places.

The next step should be to study the various mortgage loan plans available in the market. The three major plans include the 30-year loan program, the 15-year loan program and the adjustable rate loan program. While the 30-year loan program includes 360 monthly payments for 30 years, the 15-year loan program involves 180 monthly installments to be paid over a period of 15 years.

The adjustable rate loan program is different in the sense that the initial interest rate is low, but after a specific period it is adjusted according to the prevalent market rates. Before deciding on any of the options, do a thorough research on the pros and cons of each plan. The adjustable rate program may seem a tempting offer because of the initially low rate of interest, but keep in mind that mortgage rates are rising and will continue to rise and so, once your low interest rate period is over, and the interest rate is adjusted as per market rates, you might end up with a higher rate than you had ever bargained for.

Whichever plan you choose, building a cash cushion is always advisable. This means you should keep a certain amount of money every month to buffer any shock that may arise. After all 15 years or thirty years is a very period of time.