our mortgage loan is a debt, but it helps give you the purchasing power to buy a home.

Borrowing smart means getting the best possible repayment schedule, the lowest possible interest rate and the smallest possible additional costs and fees. To help you do it, here's what you ought to know.

One phone call to a lender will get you a "pre-qualification" estimate of the amount you can borrow. You can call even before you pick up the real estate section of the paper.

Most first-time purchasers investigate mortgage loans only after they agree to buy their homes. It's unnecessary and a mistake to wait.

Most banks and many other lenders will allow you to pre-qualify. They'll use income and debt guidelines . When you're ready to pass the muster of loan officers, you may later pre-apply for a loan, locking in the interest rate and other terms pending final loan approval.

The interest rate and other terms depend on your credit worthiness and the eagerness of the lender to lend. Those factors help determine the down payment required, the term in years of the loan, and options for pre-payment (meaning early repayment).

The first lender you call probably will be a traditional bank. Regulation encourages banks to lend only to borrowers with good credit records. If yours is, you may obtain your best terms from a bank. But don't take the first offer. Shop around with other lending groups. Remember, they want your money and you can get a better deal if you look.

Credit unions sometimes offer attractive or at least easy-to-get loans. The maximum amount they can lend, however, is usually smaller than that of other lending institutions.

Mortgage companies or "mortgage banks" resemble ordinary banks, but cannot accept deposits. Their business depends on mortgage lending, and they're less closely regulated than banks. They often make it easier for borrowers to qualify, and impose less stringent repayment schedules and other conditions. Their interest rates, however, are sometimes higher than those on bank loans. That's because the money mortgage bankers lend out comes from larger private investors who can command higher rates of return than ordinary bank depositors can.

Mortgage brokers, on the other hand, fall into another category. They help match borrowers with lenders. The best of the 19,000 or so in business smooth the application process and find lenders who offer favorable terms. The brokers charge fees ranging from a flat $50 to 1 percent of the loan, plus a $200 to $300 appraisal fee. The worst operate out of bucket shops and try to collect your cash without doing much at all for you. Any loan they find for you is likely to be so expensive that you wouldn't take it.

If you've already found a house, you may also find a seller who will finance your purchase, using a mortgage as collateral for your borrowing. As a buyer, these often are great deals because you can negotiate favorable rates and can sometimes buy the house with only a small down payment. Such sellers may prefer the higher interest yields they get on a mortgage loan to the lower ones available on bank certificates of deposit or government notes and bonds. Or they may be selling at a time when other sources of financing have dried up. That hasn't happened in years, but it could occur again.

Caution: Don't overpay for a house simply because the seller offers refinancing you can't refuse.

The best terms of all usually can be found from government-operated or government-subsidized lenders. Not everybody qualifies for them.

State and local housing authority loans go to first-time homebuyers with 5 percent down or even nothing at all. The loans carry below-market interest rates. Generally the loans are confined to low-income and lower-middle-income buyers in declining neighborhoods.

The Federal National Mortgage Association, the Federal Home Loan Mortgage Corp. and other government-sponsored corporations encourage mortgage lending by traditional lenders. The government-sponsored corporations or agencies insure part of the loans made to buyers with down payments as little as 5 percent or, in the case of the Veterans Administration, no down payment at all. That reduces the lenders' exposure to risk. There's no free lunch, however; the cost of the insurance is factored into the interest rate that borrowers pay.

To a first-time buyer, deciding on a fixed-rate or an adjustable-rate mortgage loan seems the toughest call of all. The introduction of hybrids, a combination fixed-rate-adjustable-rate loan, complicates the decision. Still, the decision isn't as tough as it seems at first blush. Unless there is a compelling reason, opt for the fixed rate.

A fixed interest rate remains unchanged no matter how much current market rates rise or fall. Your major concern in taking a fixed-rate loan is the pre-payment privilege. If loan rates fall a lot, and you're stuck with a high-rate loan, you may gain by borrowing at a lower rate to pay off the higher-rate loan. A prepayment penalty in your loan contract, however, could reduce or eliminate any gain and make prepayment worthless. Make sure your loan has no onerous prepayment penalty.

The term of a fixed-rate loan is another important consideration. Given a choice between a 15-year repayment and a 30-year repayment, you may want to take the longer term if you're borrowing at a historically low rate. However, if you think you might be in your home for 10 years or more, the shorter term can save you tens of thousands of dollars in interest payments and allow you to build equity faster.

Although you will make half as many payments on a 15-year mortgage, the monthly payment isn't double, but 30 percent higher. Over the life of a $150,000 loan at 8 percent, you'll save $138,000 in interest payments from paying off your principal faster. Still, if interest rates rise sharply while you're paying off a loan, the 15-year-loan will penalize you. The higher monthly payments on the 15-year loan shrink the amount of cash you have available to invest at rates even higher than the 8 percent your loan is costing you.

An adjustable-rate mortgage, or ARM, allows you to play the interest-rate market. If interest rates fall, your monthly interest payments fall too. If they rise, so do your monthly payments.

Lenders typically offer below-market adjustable rates for the first six months or year of a loan, an inducement indicating that adjustable rates are more likely to benefit the lender than you. They do, however, allow some buyers to qualify who might not at the higher fixed rate. The initial rates, called teasers, might as well be called honeymoons. They usually end.

Yet there are circumstances in which you can disregard the presumption against ARMs. If you plan a move within three years or so, you probably will sustain no great damage from rising interest rates in that time on an ARM. If you borrow at very high interest rates on an ARM, at 9 percent or higher, you stand to benefit from the probable imminent decline in rates.

Lenders typically adjust the rate on an ARM every six or 12 months. The rate is most often pegged either to an index based on what banks pay to borrow funds or to the interest yields on shorter-term United States Treasury securities. No matter how much such cost indexes rise or fall, the increase or decrease set by the lender is usually "capped" at a percentage point or two for any one adjustment and at five or six percentage points, up or down, for the life of the loan.

In addition to other upfront fees, you must usually pay points when you take out a mortgage loan, which can also be used to "buy down" the interest rate.

Another kind of cap puts a limit on your monthly dollar payment, but not on the interest rate an ARM carries. Avoid such ARMs altogether. Interest rates could rise so high your monthly payment would fall short of the amount needed to cover the full interest and principal due. Any unpaid interest is added to the principal amount you owe. This is called "negative amortization"; your debt, instead of shrinking each month, grows larger.

There are a lot of options for financing a home - not all of them good - and it can be well worth taking time before you even start looking to find out how much you can afford to borrow and what kind of mortgage will work best for you.

Federal law requires lenders to disclose the annual percentage rate, or APR, you're being charged. (The APR includes interest, points and some other fees.) But not all lenders do. Application fees, for example, can boost the cost of a loan and are not included. Use APR disclosures to compare the cost of one fixed-rate loan with another, or one ARM with another. You can't usefully compare the cost of a fixed-rate loan with an ARM, however. You can try, making assumptions about future interest rates, but that's really guesswork.

Lenders always require you to obtain homeowner's insurance. If the down payment on your home is less than 20 percent, some also require you to buy private mortgage insurance, or PMI. It's costly, usually ranging from one-third of a percentage point of the loan per year to a full percentage point. In addition, there's an upfront fee. Some insurers forgo the upfront fee but charge even higher rates in terms of points.