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With tens of thousands of lenders and brokers each offering as many as dozens of different loan programs, it's helpful to find an unbiased source to give you the wisdom to make the right choice.

To help take the guesswork out of choosing your next purchase or refinance mortgage, The Good Advice Press of Elizaville, NY has developed a 12-step program designed to guide you through the mortgage maze.

The Press is a self-help consumer advocacy group about the celebrate its 18th anniversary after nearly two decades of helping consumers save money, get out of debt, and live better on less through educational books, software, newsletters and audiotapes and a Web site.

Study Your Choices. In addition to banks and mortgage lenders, don't overlook mortgage brokers, seller financing, a family loan or insurance company financing. The Press suggests creating a loan comparison chart to sift through the differences.

Estimate Tenure In Your Home. If you plan on staying in a home for life, consider higher up front costs to obtain a lower rate. If you are moving within seven years consider an adjustable rate mortgage (ARM) with a low introductory rate or a zero-point loan.

Gauge Your Tolerance For Risk. ARMs are relatively less predictable than fixed rate loans. If you'll be moving soon, avoid them unless you can somehow protect yourself from the risk of future rate hikes.

Consider A Convertible. Convertible mortgages are special ARMs that give you the opportunity to bail out if rates climb to high, typically after the first year and before the fifth year. The conversion will cost you but you could lock in a fixed rate before your loan becomes unaffordable.

Learn The Two-Step. The flip side of convertibles, two-step mortgages give you a fixed rate for a fixed short term, say five or seven years. Then it becomes an ARM. If you sell or refinance within the initial term, you could avoid higher ARM rates.

Take A Graduated Payment. Graduated payment mortgages (GPMs) start out with a relatively low monthly payments which gradually increase, hopefully, along with your income. The loans can get you in a larger home than other loans would permit, but if your salary can't keep pace you could be in trouble. The Press says to make sure the initially lower monthly payments are high enough to cover interest otherwise your debt will increase each month.

Give Yourself Credit. Pull your credit reports before you apply for a mortgage to avoid the lender alerting you to surprises. The preemptive examination of your credit report gives you time to correct errors, add consumer statements or otherwise clean up your credit act.

Know Your Limits. Your real estate salesperson will tell you how much they think you can borrow, but your credit report is a better indication of your credit worthiness. Don't shop for a home your can't afford.

Take Your Time. Unless you know you've got sufficient long term income to handle the higher monthly payments of a 15 or 20 year loan, stick with the conventional 30-year mortgage. You can always make extra payments as if it is 15-year loan and save a bundle.

Tax Advice Is Good Advice. Taxes regarding mortgages and mortgage costs can be confusing. For example, if you write a separate check to the lender to pay the points on a first purchase mortgage you can deduct them all at once. If they are financed along with the mortgage, you'll have to deduct them over the life of the loan's term. Rules vary for second mortgages, refinancing and cash out loans for home improvements. Get professional tax advise.

Compare Everything. To truly decide which loan is best for you, you'll need to set up a table to compare all costs for each loan, including all the closing costs, points and yield spread premiums.

Plan To Invest In Your Mortgage. Even small payments each month, in addition to your regular mortgage payment, can save you a bundle. The tens of thousands of dollars you can save over the life of the loan is tax-free savings, says the Good Advice Press.

Published: June 6, 2002