Like most 20-somethings gleefully waving goodbye to lecture halls and professors, I’m still a tad idealistic about the way the world works.

Until recently I thought the current economic predicament was largely due to some grossly irresponsible minority living in fantastic estates, surely no one I’d ever met.

Then, literally overnight, I became a homeowner by marrying a dashing young man with a house and a knack for all things financial.

Being the experienced 3-week homeowner that I am, I figured it would be good to know more about the process of buying a house. In the course of my study, I quickly came to the realization that the hypothetical, grossly irresponsible group that got us in this mess looks eerily like many of us 20-something home-buyers.

Here’s a quick glimpse at what got us in this mess:

• Ever heard of a subprime-mortgage? Well, unless connected to the words, “housing crisis,” you probably won’t come across the term much in the future because they are now largely acknowledged as a prime (no pun intended) contributor.
• Remember those shiny commercials that went something like, “Yes you too can own this $500,000 dream home for only $350 a month!”? It’s true, most of us could pay $250 a month for housing. In fact, loans like this shot home-ownership in the US through the roof- especially for minorities, which are traditionally less likely to own a home because of limited access to loans due to insufficient credit scores.
• But the promising ad leaves out the kicker of classic subprime-mortgages: the buyer is accumulating massive amounts of interest and paying nothing toward the actual principal (the amount owed on the house) while the super-low teaser rates move toward expiration. Thus a $500,000 home ends up costing far more, and the buyer can only afford to make payments for the first few years.

The result: Lots of foreclosed homes. In cases like this, everyone loses money. The parties involved in the loan are left with a $500,000 home to try and sell for far more to make up the difference the first buyer accumulated in those glorious $350/mo.payment years; and that initial buyer is out all of the money they were able to pay (did I mention that many subprime loans have prepayment penalties for paying more than the tricky minimum monthly payments?), on top of taking quite a hit to what was probably a poor credit score to begin with.

That’s part of how we got into the mess, but here are some tips for staying out of it.

• Know your mortgage lingo – Subprime is a bad word now, but what about 2/28 ARM and 3/27 ARM? Those aren’t even words! But, depending on your lender, contract and financial means, these abbreviations can translate to “subprime mortgage.” These are also called hybrid mortgages because they have features of both fixed-APR and adjustable-    rate mortgages. You may also run into the term “fixed-period ARM,” which means the same thing.

• Know the lender’s contractual limits – A lot of people have gone into the multi-named subprime mortgage world with the intentions of building credit and eventually refinancing in order to escape     the unpredictable and increasing interest rates. This might be a reasonable option for some, especially when it seems the only way to build credit and investment. The key is to know the terms of your contract. If there’s a prepay penalty, you may not be able to refinance or pay extra toward your principle.   Interest rates on ARM mortgages are hard to predict, but once the fixed-APR portion of a hybrid loan has expired, the lender can charge additional interest, on top of the current rate. If you go this route, you need to make sure there’s an interest rate cap structure that limits the fully-indexed interest rate.

• Know your alternatives -  Fixed-APR mortgages are looking pretty good right now, with the potential to land a cool permanent interest rate in the neighborhood of 5 percent. You’re not likely to run into prepayment penalties, and even though initial interest payments may be more than your actual house-payment, by the end you’ll be paying about the price of a latte for monthly interest. There are also government-sponsored alternatives that don’t require long-time squeaky clean credit, and can come with lower interest rates, as well as requiring low down payments. Check out some of the details at fha.com.