Made out of people

Mortgages make my eyes bleed

I'm working on trying to buy a condo somewhere out here in the Seattle area. Turns out the really interesting bit is financing it.

(Read below. This is mostly trying to straighten out my own thoughts).

Unless I show up with 20% of the house value in hand, I need to somehow get a mortgage for more than 80% of the cost. The old way of handling this was to get a large mortage for, say, 95%. But that triggered something called "Mortgage Insurance" -- essentially, buying a policy against my own default

For reasons that are somewhat mysterious to me, mortgage insurance seems to be gone. You now handle this with a second mortgage at substantially higher rates. This mortgage can be a line of credit, or home equity loan, or a conventional mortgage. (For the second, it appears to be centered around an odd legal fiction: you take out a loan against the down payment on the house... but you then spend that money on a down payment for the house.) Either way, somehow this dodges, for those with adequate credit, the nastiness of mortgage insurance.

So then: Do I want my main mortgage to be fixed, or adjustable, or balloon? Adjustable immediately (which is cheaper) or later (which locks in good rates for five or ten years, but then can jump a huge distance)? Am I risk-loving enough to balloon in ten years (meaning I have to pay off the whole balance then), or should I wait for fifteen?

Am I going to live here for more than two or three years?

Do I want to make a dent against principle (which hardly happens in the first few years anyway), or am I ok with an interest-only mortgage (which means that I make no progress against principle at all?) for a few hundred dollars less a month?

The set of combinations is mind-boggling. And that's before I whip out the spreadsheets: "I need to contribute at least 5% of my own. And I need to have two months' payments set aside in my bank account. And I need to have closing costs. But the seller will pay some of them."

And that's where my head begins to hurt.