Buying a home is a rewarding experience.  You get to see your hardwork and dreams come into fruition. However, even with all that excitement and joy, comes the reasoning that no matter how dreamy the house is, it can’t be yours if it doesn’t truly fit into your budget.  You don’t want to settle into a home that’s going to have you stressed about mortgage payments or repairs every month. You can always use our mortgage calculator as a starting point but there is more  to use in nailing down your budget.

Let’s get into the nitty gritty of your budget and how you can effectively use a mortgage calculator as one of the tools in figuring out your mortgage payments. Here is a breakdown of what you need to consider as you breakdown your budget:   PCM Budget Planner

Once you’ve completed this free PDF  you will have a greater understanding of what is available for your monthly mortgage payments. You don't want to stretch your budget, you want a budget that works for you, and not you working for it. You will now need to decide how much of your savings you would like to allot for a downpayment.  Once you have narrowed down all of these factors you will be able to use our mortgage calculator more efficiently.

Many financial advisors and planners will tell you to make sure you have at least a 20% downpayment, which can lower your overall monthly costs. However, does that leave you with an emergency budget? Does your new home need new appliances?  How long did it take you to build that nest egg? Before you get into if you want to put 20% down or not, consider the type of loan you may want to go for, the types of loans available for homeowners. 

30 Year Fixed Rate:

This type of loan has constant payments and is perfect for the homebuyer who plans on staying in their new home for seven or more years.  Our agents can walk you through  any challenges that may come up with type of loan. 

15 Year Fixed Rate:

This is similar to the 30-year fixed rate rules but comes with a higher monthly payment and takes half the time to get to the finish line. This is great for those who are looking to pay their home off quickly and save themselves thousands of dollars in interest payments. 

Adjustable Rate: 

This comes only in the 30 year option. However the interest rate on this type of loan changes periodically.  This is a great option for the homeowner who is looking for a lower initial down payment, however if interest rates are low these options don’t always make sense for buyers. Most buyers purchase the adjustable rate with the potential option to refinance when the loan fixed rate period ends. If you are a little more financially savvy, this probably isn’t the most appealing option, but it doesn’t mean this option is out the window,  you would want to discuss this further with our brokers to see if this would be setting you up for failure or success.

FHA:

An FHA loan is one that is insured by the Federal Housing Administration (FHA). Typically this is the easiest loan to qualify for and it requires a minimum down payment of 3.5%. With an FHA loan, there are many advantages, such as lower credit score requirements and down payments, however you would pay PMI for the lifetime of the loan. 

None of these loans require the 20% down payment that many financial advisor’s would recommend.  Some lenders might give more favorable options to those able to make a 20% downpayment.  The most popular advantage of the 20% down payment would be eliminating the need for PMI. What’s PMI? It is private mortgage insurance and it’s required on loans without 20% down. PMI doesn't come as a standard percent, but most financial advisors will have you assume PMI to be 1%. However an educated broker may be able to work out a more favorable option for you. There are even some cases where our loan officers have been able to negotiate fantastic rates for our clients, that provide better pricing on the mortgage, simply because it's insured. 

At PCM we believe in developing and educating you throughout your loan process. We want you to understand your loan and how you can be more financially efficient with your investment. The best way to figure out which type of loan fits your needs, is to get in touch with our agents so we can get you pre-approved and ready to confidently search for your new home.

Mortgage rates fluctuate daily, so reach out now and let’s start planning your budget. People’s Choice Mortgage works with over 80 banks and is able to work with you to negotiate to find the best deal for you.  We canvas a wide range of banks throughout your loan process, so that we can get you locked in at the lowest possible interest rate.  At People’s Choice Mortgage we pride ourselves on treating our clients like family and working with them for as long as it takes to ensure their goals are met and homeownership is achieved. If you want a broker who will invest in you, sign up for your free quote or contact us today and discover your financial options.