Buying a new home is one of the largest investments you'll ever make. Choosing a well-informed real estate professional to guide you through this important transaction can save time and make home buying easier.

After selecting a real estate agent with whom you are comfortable, you should meet with a lender to pre-qualify for a loan. Your lender will determine a maximum loan amount for which you are eligible.

Now, it's time to determine your housing needs. How many bathrooms and bedrooms does your family require? What type of neighborhood appeals to you? Do you prefer a restored Victorian or a contemporary ranch house?

After this is determined, your agent will show you prospective homes that fit these preferences and fall within a predetermined budget. When you've selected a home, your agent will help you prepare and present an offer to the seller.

An offer is a proposed sales contract. If the seller accepts it, you have a binding agreement. This is why your first offer should be as much in your favor as you can make it.

There is no standard real estate purchase contract. You can modify or add anything to a standard contract form. If the seller agrees, you have a deal. If not, you negotiate or keep looking.

Your offer should state:
• what fixtures, appliances and personal property (draperies, furnitures, etc.) are to be sold with the home.
• that your deposit (earnest money) will be refunded and the sale cancelled if you are unable to obtain acceptable financing within a specified period of time.
• that a wood infestation report states the house is free of termites, beetles, carpenter ants and damage done by such insects, and that the contract is subject to this report being satisfactory to you.
• that a certificate states that the house is structurally sound, and that the plumbing, heating and electrical systems, as well as appliances are in working condition.
• how the reserve accounts (prepaid) for taxes, assessments, premiums and interest on assumed mortgages are to be divided between buyer and seller, as of teh settlement date.
• that the grounds and the home's interior will be cleaned before you take possession.

Negotiable costs include those for title search, property survey and building inspections. The seller must provide a title, free and clear of all liens and encumberances, except those agreed to in the contract or approved by the buyer after receiving the title search report.

Lenders and title insurance companies require a property survey to determine the exact locations of the house, property lines, easements and rights-of way. Either buyer or seller can pay for this.

To make sure the service is being done in their best interest, many buyers pay for inspections to determine structural soundness and the condition of the plumbing, heating, electrical systems and any appliances being purchased.

Before you sign your offer, make sure it contains the price of the home, the method of payment, the time you want possession of the property and other requirements.

When your offer is accepted by the seller, and a purchase agreement is signed by both parties, it becomes a binding contract. At the closing, all final documents securing the mortgage are signed, the seller is paid and you are given possession of the home.

Types of Mortgages
There are hundreds of mortgage programs that have become available in the past few years. One reason to be pre-approved by a lender is so the best loan available can be tailored to your needs.

With a Fixed Rate Mortgage, the interest rate does not change over the life of the mortgage. Conventional mortgage loans are available, as are loans insured through the Federal Housing or Farmers Home administrations, and those guaranteed by the Veterans Administration. Most have fixed rates, as do some assumable and owner financed loans, and relatively new variable rate government loans are also available.

Adjustable Rate Mortgages (ARMs) have a low interest rate for the first year or two, after which it is adjusted reguarly, relative to a specific index, with payments going up or down, accordingly. The most common used indexes are rates on certain treasury notes or the average regional or national cost-of-money to savings and loan associations. Some lenders use their own cost-of-funds, over which, unlike other indexes, they have some control.

Graduated Payment Mortgages offer fixed interest rates and a 30-year term. Payment amounts start at a low level, then gradually increase over a few years to an amount that will amortize the loan in the 30-year period.

Growing Equity Mortgages offer fixed interest rates and a 30-year term. Monthly payment amounts are at the 30-year rate for a specified period of time, then increase 2 to 5 percent annually.

Short-term Balloon Mortgages are fixed rate, discount-priced, and based on the Federal Reserve's discount rate, plus a .25 to 8 percent local add-on. They are keyed to a 30-year payout, and must be paid off or refinanced in seven to 10 years.

Fifteen-year Mortgages are discount priced slightly higher than balloon mortgages, plus the local add-on. The interest rate is low, and payoff is fast.

Ten-year Mortgages offer a discount priced slightly higher than balloon mortgages, plus the local add-on. To take advantage of this discount, you must be financially able to handle a 10-year amortization schedule.

Being a Smart Borrower
Mortgage rates, terms, requirements and settlement service costs vary from lender to lender. For the best deal, check out commercial banks, savings and loans, credit unions and insurance companies. Compare rates and requirements on appraisals, credit reports, surveys, title searches, settlement costs, title insurance fees, points and prepayment penalties.

Ask lenders if their own customers get more favorable terms. It may pay to transfer accounts or credit cards to their facility. Ask about an open-end clause, allowing you to borrow more money later without refinancing. Ask potential lenders to provide a written good-faith estimate, comparing each type of mortgage line by line. Ask about capping an adjustable rate mortgage, to limit the amount the interest can increase each adjustment period and overall. The avoid negative amortization (interest being added to the mortgage's principal), make sure your payment amount rises with each interest rate increase. Ask about a conversion provision allowing you to change to a fixed rate mortgage at a specified point in the life of the ARM.