Years ago, there was basically one kind of mortgage; the 30-year fixed rate. Today, you can choose from many different kinds of mortgages. It may seem confusing but these new kinds of mortgages can often make home ownership more affordable.

Q Aren't there really just two kinds of mortgages: fixed and adjustable rate?

A You could say that, because all mortgages fall into one of these two categories; that is, the interest rate you pay is either the same (fixed) for the life of the mortgage, or it can change (adjust) over the life of the mortgage (see "Mortgage Tips & FAQ's" section).

But within these two broad categories, there are many different kinds of mortgages designed to fit people in different financial situations and many of them are designed especially for first time home buyers (see "Help for First Time Home Buyers").

Q How do I know which type of mortgage is best for me?

A There isn't a single, simple answer to this question. The right type of mortgage for you depends on many different factors:

• Your current financial picture
• How you expect your finances to change
• How long you intend to keep your house
• And how comfortable you are with your mortgage payment changing from time to time

For example, a 15-year fixed rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. And an adjustable rate mortgage may get you started with a lower monthly payment than a fixed-rate mortgage but your payments could get higher if the interest rate increases.

The best way to find the "right" answer is to discuss your finances, your plans and financial prospects, and your preferences with your mortgage lender.

Q What does my mortgage payment include?

A For most homeowners, the monthly mortgage payments include three separate parts:

1. a payment on the principal of the loan (that is, the amount borrowed)
   
2. a payment on the interest
   
3. and payments into a special account (called an escrow account) that your lender maintains to pay for things like your hazard insurance and property taxes. These elements are called PITI (Principal-Interest-Taxes-Insurance). (See "Mortgage Tips & FAQ's" section for more information.)

Q How much will I need for the down payment?

A Probably less than you think. Many first-time buyers are surprised to learn there's no set answer to this question. Generally, though, your down payment can be anywhere from three to twenty percent of the home's value. Down payments can be lower for some special, first-time buyer loans, and veterans or those on active military service can obtain loans with no down payment at all. Your mortgage lender can help you with this.