Mortgage dilemmas, like any other problem, are best solved if detected early. The earlier you spot some signs of trouble, the better chances you have in preventing a major predicament. This is similar to how a former chief risk officer for mortgage giant Freddie Mac claims that today’s housing crisis might have been prevented had CEO Richard Syron heeded his warning about backing risky mortgages.

But that’s all water under the bridge now. We just have to deal with the situation at hand; besides, the new housing bill has already been signed into law last month.

For our part, we mustn’t allow ourselves to be stuck in a difficult position in terms of our mortgages, and be careful in the deals we make to avoid future mortgage problems. This means we have to be responsible homebuyers. A responsible homebuyer makes sure that he or she makes certain that there is enough income to shoulder the cost of the house, and avoid risky mortgages.

Risky mortgages will cause you trouble in the future. So if you are a first-time homebuyer, make sure that you are aware of these high-risk mortgages:

• Adjustable rate mortgages (ARMs) – are loans whose rates change depending on the interest rates in the marketplace. The amount you pay for this kind of mortgage will depend on the interest rates on the loan, meaning, you pay more if the interest rate rises, and less if it falls. There are 10/1 and 7/1 ARM. 10/1 ARM means that your rate is fixed for ten years and then adjusts each year. 7/1 ARM is the same; your rate is fixed for seven years and then adjusts every year. This however, has a high chance that payments will shoot up drastically.

• Option adjustable rate mortgages – allow you to choose how you are going to pay for your mortgage each month, less or more. You can either pay a low minimum payment, pay-only the interest, or choose a 15-, 30-, or 40-year amortization schedule. This gives you the chance to base your payment scheme on your monthly budget. However, there is a risk that you don’t build equity for your house because you’re only making small payments. In addition, you will eventually owe more on your house at the end of each month.

• Negative amortization loans – sometimes result from option ARMs. This type of loan doesn’t lessen your balance because you pay so little that you don’t even cover the interest. As a result, you don’t get to pay off the balance of your loans. This will make you owe the bank more money, because aside from the principal balance, the interest rate you didn’t pay is added to your loan.

• Interest-only loans – allow you to make small monthly payments, especially if you have a varying income. You don’t pay off your balance right away because you only pay for the interest, so you end up not building any equity for your home. However, this makes it possible for people to purchase more expensive homes without paying a lot. You can also customize your amortization schedule with interest-only loans.

These mortgages all have their pros and cons, and it is up to you to choose the one that best suits your financial capability. For most people, a fixed-rate mortgage is deemed safer to utilize because this enables you to pay for the same amount each month until you pay off everything.

We always hear medical people say “an ounce of prevention is worth a pound of cure,” and this also applies to borrowers. Do not buy more than what you can afford, discuss with your brokers and lenders, and evaluate the risks you may face if you go for a particular mortgage type.

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