Selecting the right mortgage package as a first time home buyer can be a confusing process, and working with a mortgage loan officer isn't always the best way to get the mortgage loan that you can afford. One of the biggest mistakes that first time is to sign on the loan that they qualify for, instead of taking a smaller loan that they can actually afford.

After the loan officer had assessed your qualifications based from your income ratio, evaluate first your readiness in terms of your monthly payment or budget. People who fall into the trap of borrowing the entire loan amount they qualified for may find their monthly budget exhausted and can end up regretful.

To prevent yourself from borrowing up to the limit that the loan officer presented, you can set your own loan amount limit. This can help you effectively manage your housing expenses based from your income bracket. There are several ways to find the right mortgage for your newly-purchased home:

1. Be informed about the tax benefits. 'Interest only' loans are those that allow deducting the entire payment from your taxes on a particular year. There are also other loans with negative amortization that won't permit deduction of interest from the monthly payment.

2. Evaluate the long-term advantages. Whether you're planning to live in your home for 30 years and more or not, it is still advisable to know the pros and cons of your mortgage package. A fixed interest rate loan is somewhat higher in amount but unlike ARM and other loan products, it can safeguard you from changing market conditions. But a fixed interest loan also has its limitations. Smart Consumer's Guide to Home Buying's author, Barron, proposes that the fixed interest rate may increase your payments because of the demands of the escrow account linked with it.

3. Ask about other home payment options. Flexibility in your mortgage loan's payment can help you maximize your funds. For instance, there are mortgage loans that allow making extra payments toward the principal balance without worrying about a penalty. You may inquire about this type of loan so that you would not be problematic of your debts in the future.

4. Look for ways to keep payments low. Even when the lender offers you a large loan, consider cutting back on the loan amount so that you can keep the payments within an affordable range. A low interest rate, long loan term, and the ability to make interest-only payments are a few ways to keep payments as low as possible and within your budget range.

5. Avail yourself of mortgage insurance. Not all Minnesota first time homebuyers have available funds to serve as down payment, though it can create a difference to your monthly payments and loan amount. When you have mortgage insurance, you can have funds for your down payment. In some instances, mortgage insurance can help you apply for an attractive product minus any down payment.

You want to invest in real estate. What's the best way to use your money? The use of leverage and OPM (other people's money) is what makes real estate such a powerful investment tool. Different people have distinct viewpoints regarding how much leverage and OPM is good.

First of all, always make a qualified mortgage professional part of your team of experts; the examples that follow may not be appropriate or even possible for your particular situation. Some people have the goal of receiving cashflow every month to supplement their incomes while others want long-term financial success through investment appreciation.

To vitalize your financial goal, look closely into your options. What's amazing in the real estate market is the assurance that you are in control. For instance, you have $20,000 to start with. With this amount, you can have either a 10 percent down payment on a $20,000 worth of property or a 20 percent down payment on a $10,000 property. Of course, you will be the one to decide which is better.

Maybe you want to ask: what is the difference between these two options? Considering you decided to put in a larger down payment, chances are, you will pay your mortgage at a much lower price and you do not need mortgage insurance at the 20 percent mark. Larger down payments can provide you cashflow if that is what you like.

On one hand, let us say that the appreciation is set at 6 percent for both properties. (Appreciation rate varies depending on the location, type of property, etcbut for this specific article, we will assume it at 6 percent). In just a matter of one year, your $100,000 property is now worth $106,000. However, the $200,000 property becomes $212,000!

The amount of appreciation for both properties ($100,000 and $200,000) obviously doubles itself year after year. All these and more, but you would not be spending any thereby saving yourself some serious bucks!

In no time at all, savvy investors like you will have enough to get you some equity and you can eventually purchase another property. The MORE properties you have working for you, the better the effects of appreciation will be. What are you waiting for? There will be some limitations in paying a lower percentage down payment though such as additional maintenance costs. But those are minor issues if you compare it to the long-term benefits it promises.

In addition, cashflow is taxable but debt payments and maintenance costs are tax deductions so again you're getting an advantage by using more leverage (more OPM) and getting less monthly cashflow. Some people need the monthly cashflow, and if so, one can shift his strategy to accomplish just that. Many others will find that giving up the extra cash every month means huge long-term wealth building advantages.

With these in mind, its not surprising that you chose the better one. Start pooling your team of experts now and make the right choice!

Alexandria P. Anderson is a Minnesota Investment Property specialist who helps First Time Home Buyers In Minnesota to find and purchase properties in MN. Get a free copy of "The Investors' Rental Guide" at GreatInvestmentProperty dot com. 

Many of us today are faced with the challenge on whether to buy or rent a home. And in these trying times, it seemed tough to answer. In addition, family and friends who have limited professional knowledge swamp us with advice that are often unreliable. Remember that it is not appropriate to "ask a BUTCHER how to BAKE a loaf of bread". While it is good to listen to them, it would still be best to keep in mind that concerns of this IMPORTANCE require an expert's opinion. Professionals can give us surefire answers to base our judgment from.

Whoever you take advice from should consider your individual situation, have experience, and be able to prove his/her point with solid evidence. In the case of should I rent or should I buy, Russell Gray (co-author of the book Equity Happens) would say "Do the math!"  In other words, everyone's situation is unique and often times math is the solution to get an objective opinion (in this case, numbers) about what choice to make in the rent vs. own debate, at least from a financial standpoint.

With that being said, I'm not going to try and tell you which option to choose. I cannot possibly do that because I don't know your particular situation. I will tell you some numbers to think about and I will say that for many people, right now is an amazing time to purchase a home. You can start with monthly expenses. In the case of renting, add up your rent plus any additional fees and the utilities you must pay.  

On the side of ownership, more items are combined together that would require a professional's assistance. Included in the ownership costs (otherwise known as PITI) are the following: "principal" which pertains to the amount you must prepare toward your loan's principal, "interest" or the amount paid towards your loan's interest, "taxes" or the amount you must pay for property taxes, and "insurance" which pertains to both property and mortgage insurance. This makes the process a bit more daunting.

In addition to the PITI costs, you will still have utility expenses plus maintenance costs like lawn-care, occasional new shingles, appliance, etc.  After you add everything up you will then be able to see what the monthly monetary difference is between owning and renting.  Or, if you are currently renting and you can pay no more than what you are currently paying per month, you can work backwards on the ownership costs and determine what price of home you could buy.  It's important to not just look at the monthly payments, however, and also look at the long-term financial advantages.

In this case, ownership seems to be where the long-range financial rewards are. Renting a house does not guarantee a title even after years of investment. You will also notice that your rent increases as time goes by. On the other hand, the payment or main cost allotted to buying a house practically stays the same even through the years except for some such as utilities, insurance, etc. The good news is that there is a promise of equity from all the payments you have made towards the ownership of your house. In an appreciating market like ours - a wise choice can go a long way in as far as the value of appreciating our home is concerned!

There is a good chance your choice shifts according to your personal feelings and opinion. Simply put, making the best decision towards renting or owning a home involves your subjective feeling. What can be more fun than having a house you can call your own, and enjoying the independence in creating changes with it however you like it! On one hand, you might favor the side of renting if you will give emphasis on other concerns such as having no lawn to mow, or other maintenance issues.

Often, financial consideration plays a big role but also brings into mind subjective feelings over the argument: to buy or to rent a house? To be more specific, purchasing expensive appliances no longer bothers you when you have huge savings from renting instead of owning. Or maybe, the freedom to do whatever you want with your own house appears inconsequential if you will note the massive expenses you shed off just to purchase your home. Either way, the dictum "numbers do not lie" proves that the former is still weightier than the other.

Conversely, this piece wants to point out two important concerns relative to renting and buying a house. One is to seek advice from the right authority to help you identify the best course of action. Next is to examine carefully both the financial and subjective considerations. The gains or benefits usually become apparent on a long term basis. Finally, it would help to bear in mind that we are in a buyer's market where ownership is deemed favorable over renting.

Author: Alexandria P. Anderson specializes helping people to find and purchase homes on Lake Minnetonka, as well as Lake Minnetonka property for her realty clients.