The process of choosing which type of mortgage best fits your budget may seem mind-boggling because there are several different types of mortgages available in the market today. You can narrow your choices down by educating yourself on how to make the right decision.

One important factor to consider would be the kind of interest that would be applied on your loan. In this light, there are two basic interests you can choose from: the fixed-interest loans (where the schedule of payment remains the same for the life of the loan), and the adjustable-interest loans (where, subject to limits on ceilings pre-imposed by the government, payments increase or decrease on a regular schedule with changes in prevailing interest rates).

Among the hundreds of mortgage plans available, there are four more common ones most lenders offer, and each type can either have Fixed or Adjustable Rates. The four types of mortgage are:

1) Conventional: A "traditional" mortgage, mostly under $275,000 not directly insured by the Federal Government.

2) FHA: Designed for low to middle income borrowers and mostly first time buyers. This is under the Federal Housing Administration (FHA) a division of the U.S. Department of Housing and Urban Development (HUD).

3) VA: The Veterans Administration (VA) which insures (but does not fund) those qualified by military service. It offers lower down payment and lenient qualifications.

4) No-Document Loans: Also known as no-doc mortgages are usually offered to self-employed people, those who do not wish to have their income or credit history checked or those with no credit history. This type of mortgage has a shorter application process, since there is no requirement for financial documentation. On the downside, the no-doc mortgages are pegged at a slightly higher interest rates and are offered only by very fewer lenders because of the high risks involve.

Do not be overwhelmed by all these seemingly highly technical terms. It is really all so simple: if you want to procure a property of your own, you have to have money to purchase it with; if you dont, you can avail of a loan that you pre-qualify for.

There is yet another other type of loan that may be open to you, if you only dare to inquire. It is called the

5) Owner-financed Loan: Dont forget to inquire about the possibility of entering into this other option that would be kinder to your pocket. With this type of loan, a big amount of faith is in place between the buyer and the owner. A more considerate mode of payment could be arranged between the buyer and the owner, as institutionalized fees for borrowing from other sources of funding are not applied.

The owner-financed loan could be a win-win arrangement if the owner plays his card well. He has the option to take (or resell) the promissory note signed by the buyer to a third party (maybe to the bank or to any other lending institution) in exchange for a smaller lump sum now. He would, thereby, be transferring the liability of collecting from the buyer of his property the full amount pledged therein over time. By doing this, the owner may lose the interest over time on the direct loan, but he gets paid on his property already and he could use the lump sum for other prospective, income-generating investment.

Whatever type of mortgage you choose from among the many types of mortgage available to you, it is best to go into it with your eyes open and your budget straight.