Purchasing a home will be the single biggest purchase of your life (Unless you're in the habit of buying airplanes and large boats). If not done properly you could wind up paying thousands more than you have to. You're going to need professional advice, both from a real estate agent, and from your loan officer. You need to know ahead of time what is more important to you: having as small a down payment as possible, or having the lowest monthly payment possible. Do you want to pay points to get a lower rate? Are you willing to take a slightly higher rate in order to reduce out of pocket costs? Should you take go FHA, VA, conventional, non-conforming? These are all questions best answered with a professional mortgage broker. However, here are some rules-of-thumb to think about.

1	Make a big down payment. Believe it or not, banks don't want you to put a lot of money down on your home. They would much rather lend you 97% of the value of then house than 80%. They make more in interest, and you have to pay mortgage insurance that protects their investment. You get hit with a double whammy. To reduce your monthly payments, put as much down on the house as possible. If you can put 20% down, you should. This way you can avoid paying private mortgage insurance (PMI) payments. PMI is not tax deductible. The other reason is that your mortgage payments will be much lower. You won't be making a PMI payment for one thing, and your mortgage will be based on 80% of the sales price instead of 97%. Depending upon the size of the loan this could be several hundred dollars saved each month!
2.	Make as big a down payment as possible. Even if you can't put 20% down, put as much down as possible. The more you put down, the less your mortgage insurance premiums will be. Again, PMI is not tax deductible. Only the interest is tax deductible.
3.	Don't skip the first month's payment. One of the things you may be surprised to find out when buying your home is that the bank doesn't want you to make the first payment. You take possession on July first, but you don't have to make your first payment until August first. Isn't that nice of the bank? If you think they do it so you can spend more on furniture, think again. The law says they can't charge you interest on the money you've borrowed until the end of the month, and any money you send them prior to the end of the month, has to be paid onto the principle. That would mean that if you made the payment, the entire principle and interest portion of the payment would have to go towards the principle. By doing that, you will shorten your mortgage by eight months, and save yourself over $10,000 on a $200,000 loan at 7% interest. That one early payment is equal to your first eight monthly principle payments.
4.	Double your principle payments. If you do not have a lot to put down, make your complete mortgage payment plus the next month's principle for the first two years, or for as long as you can. It will probably be less than two hundred dollars. These extra payments now will save you THOUSANDS of dollars by drastically reducing the length of your mortgage. Even an extra $50 to $100 per month over the life of the loan can shorten you mortgage by three to six years, and save tens of thousands of dollars in interest. Of course, the bank would rather you not do this.
5.	Keep an eye on your Loan-to-Value ratio. When it reaches 80% or lower, you are no longer required to pay PMI. Have it removed. The lender will not watch this for you. This applies to conventional loans only, not FHA.
6.	Get two loans instead of one. If you don't have a large down payment, you may want to buy your home with an 80% first mortgage and a 20% second mortgage. This is quickly becoming a very popular option. You'll save money because you won't be paying PMI, and your combined interest rate still be very attractive. The other obvious advantage is you'll spend less money out of pocket. However, not every mortgage broker or loan officer knows how to put an 80/20 loan together. You'll benefit from having someone experienced in these types of transactions helping you. Fortunately, I specialize in these loans.

Finally, I'd just like to say that when you are ready to look for a home, you need to find a loan officer you can trust. Someone local that you can meet with face to face, someone you can get to know on a first name basis. You need someone who knows the ins and outs of the industry leading your way; someone who's not locked into working with any one lender. You need a professional mortgage broker. Brokers work for you, not for one particular lender. A loan officer in a bank gets paid whether or not he gets you a loan. A mortgage broker only makes money when she succeeds in finding you a loan. Bank loan officers generally have only a handful of loan programs available to them, while Brokers have hundreds. Banks sometimes force you to open an account with them to get the best rate on your loan.

You also need an experienced mortgage broker. Every time falling interest rates creates a refinance market, the mortgage industry turns into a feeding frenzy of shark-like, inexperienced sales people jumping into the market to feed on easy pickings. Last week they were car salesmen, this week they are "loan officers." The very obvious problem is that they know nothing of the business, and can jeopardize your chances of approval unless your loan fits into the "easy-squeezy" category. An experienced loan officer can find exactly the right loan for you, instead of trying to force you to fit into the only loan program he knows how to do.

The first step on the road to home ownership is to call me at 425-357-9643. I'll ask you a few simple questions and help you decide if this is the time to start looking. Who knows? You may be closer to owning your own home than you think!

Doris Fitzgerald is a loan officer for Financial Advantage in Everett, WA. She specializes in helping renters become owners. Her expertise is in finding zero down loans for just about anybody. She may be reached by calling 425-357-9643. You may purchase a copy of her book, How To Keep More Of What You Make! in our online bookstore.