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As Congress and professional real estate organizations debate the best ways to keep homeownership available to most Americans, many first-time homebuyers find themselves confused by their mortgage loan options. The government's attempt to protect borrowers from unscrupulous lenders also hinders the ease of first-time real estate buyers in obtaining these loans. One of the best ways to find a loan that will work is to know the options that exist, the benefits, and the risks.

Conventional Real Estate Mortgage Loans

Traditional 30-year and 15-year fixed loans are widely available, and the most popular options. But adjustable rate loans, where the interest rate fluctuates with prime lending rates, are also very popular. In fact, interest rates on 5/1 ARMs dropped at the end of June to an average 6.04%. In a 5/1 ARM the rate of interest on your real estate mortgage is set for the first five years, then fluctuates yearly after that.

Low/No Down Payment Real Estate Mortgage Loans

In 2006 USA today reported that 43% of real estate mortgage borrowers didn't put any money down on their home loans. While this is more difficult with stricter regulations, lower and no down payment real estate mortgage loans do exist. Typically these are available to those with a strong credit and stable work history, but little cash on hand.

Government Funded Real Estate Mortgage Loan Programs

First time homebuyers and low-income borrowers are eligible for a wide variety of government insured real estate loans. The Federal Housing Authority (FHA) funds many of these. Specific programs exist for community workers like teachers and police officers, Native American Indians, and residents of low-income housing projects. Ask your real estate agent or mortgage loan officer what you qualify for.

Alternative Real Estate Mortgage Loan Programs

The real estate reality is that traditional mortgage loan options don't work for everyone. This is why loans evolved that let you tap the equity in your home, pay off the interest first, or forego Private Mortgage Insurance. These can all be great tools and have their place- when applied ethically and with financial awareness.

Both the National Association of Realtors and various Senate subcommittees are working on developing guidelines that protect borrowers without making obtaining a real estate mortgage out of reach for the general population. Many concerns have risen from defaults on Alt-A, interest only, and other alternative loans.

In fact, Alt-A real estate loans, which give non-traditional underwriting options to good credit candidates with issues like poor documentation or expanded debt-to-income ratios, are showing high delinquencies. Standard & Poors reports that as of June 2007, the defaults on Alt-a Loans for 2006 were four times higher than in 2004.

These loan options may still work in your individual situation. Balance your need for a lower interest rate, lower monthly payment, or lower down payment against your ability to handle the balloon payment or interest increase at the other end of your real estate loan.