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. Consider the tax benefits. Some mortgages are 'interest only' loans which means you can deduct the entire payment on your taxes for that year. However, loans that are designed with a negative amortization scale won't allow you to deduct interest from your 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. Inquire about flexible payment options. Some home mortgage loans allow you to make extra payments towards the principal balance without paying a penalty, which means you can start paying down your mortgage when you have extra funds at your disposal. Find out if your loan products offer this type of flexibility so you can start paying down and be free of debt sooner than later.

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. Apply for mortgage insurance. Most first time home buyers do not have a lot of money available for the down payment, which can make a big difference to the loan amount and monthly payments. Mortgage insurance can provide for your down payment, or in some cases, allow you to apply for an attractive loan product without having to make any type of down payment.

Author: Alexandria P. Anderson specializes helping people to find and purchase Minneapolis Condos, as well as Minneapolis Lofts for her Minnesota real estate clients.