Right now, the kind of mortgage that is right for you is one you can get, which is to say, maybe no kind of mortgage. Credit is so tight right now you couldn’t get a needle past it with a sledgehammer.

In fact, I was just reading today on MSNBC that things are so bad right now, realtors are getting up at the crack of dawn just to call the mortgage companies before their answering machines fill up for the day. Mortgage companies are laying employees off so fast that often no one is available to answer their phones in person, and by the time normal business hours start, the machines are completely full.

Happy house hunting! Rots-a-ruck!

However, let’s assume that eventually (and we hope sooner not later) things do get back to something resembling normal in the world of home finance. Once that happens, you will find that home mortgages tend to fall into one of a few basic categories:

Fixed Rate Mortgages

Fixed rate mortgages are just what they sound like they are: mortgages in which the interest rate stays the same for the life of the loan. In general, the longer the mortgage term, the higher the interest rate. The standard term for a fixed rate mortgage is 30 years, but 15 year mortgages are also very popular, especially for homeowners looking to refinance. Five and ten years terms are also available, and many lenders now offer 45-year fixed rate loans, which is generally an expensive way to go, but if you need to get your payment down a 45-year term can be one way to get into a home you can afford without a lot of tricky special conditions and hidden clauses.

Variable Rate Mortgages

Variable rate mortgages come in many different forms, but the general idea is that the initial interest rate is fixed for a short period (typically two to five years) after which the interest rate can go up or down with fluctuations in the prime lending rate.

Variable rate mortgages are often sold to young people who want to get the most house they can with the money they have right now, and who can count on their incomes rising over time. Sometimes this is a good idea; sometimes it is a disaster. When considering a variable rate mortgage, it is important to understand how often the interest rate can be reset (at what intervals?–six months? two years? five years?) and whether a cap is placed on how much the interest can increase at each interval, and how much it can increase over the life of the loan. You should be confident you can handle both best and worst case scenarios.

Another feature to watch out for on a variable rate mortgage is a balloon payment clause. If, after a certain amount of time, the entire amount of the mortgage is due in full, that’s a balloon payment clause. Many people who are losing their homes today took out variable rate mortgages with balloon payment clauses at the peak of the housing bubble, because they were told the value of their homes would only increase, and interest rates would only continue to fall, making refinancing to a 30-year fixed rate before the balloon payment came due an easy task. We all know how that worked out: Not so well.

Just because your lender says something will happen in the future doesn’t mean it will unless it’s in the contract. They’re lenders, not fortunetellers. They are there to sell you a mortgage; you are there to look out for yourself and make sure you understand what you are signing.

Interest Only Mortgages

Believe it or not, you can get a mortgage in which you never pay on the principle for five years, sometimes longer. These kinds of mortgages were popular in hot housing markets where, to get into the market at all, you had to buy way beyond your means and do it fast. The likelihood that anyone will write one of these mortgages for you now is not good, the credit crunch being what it is.

In general, this kind of mortgage is an awful idea anyway. You are betting that your home will only increase in value and also that you will be able to afford the actual payments when you start owing on the principle. Don’t bet with your house, bet in Vegas. Buy a house you can actually afford, and if you can’t afford a house, save your money until you can.

How to Choose?

I’m going to be very opinionated and frank here: Choose the shortest-term fixed-rate mortgage you can get, if you can get one at all. If it has to be a 30-year fixed rate mortgage, get the best rate you can and pay extra each month on the principal, even if its only $20 extra. This will build equity in your home and give you peace of mind. Don’t even consider a variable rate loan until the housing market gets done having the biggest nervous breakdown in its recorded history. That may take some time.

If you have to wait, because you can’t get a conventional loan, save.

Some people can qualify for special loan programs under the Veteran’s Administration, the Department of Housing and Urban Development, or the Federal Housing Administration. We’ll go over those options next Tuesday.

In the meantime, don’t give up! Be smart, be hopeful, be ready to grab that dream house when it appears; but on your terms, good ones.