How to Choose the Right Mortgage for You

If you’re shopping for a home mortgage loan, you can definitely save time and money by choosing the right lender and loan terms. First, you need to spend time looking for that right lender.

The process of buying a house can be confusing to many first-time homeowners. It’s not only about choosing a good real estate agent, a pleasant neighborhood, and a home you’d enjoy. It’s also about securing a home loan that will give you a solid financial foundation.

Working with a reputable mortgage lender and getting good loan terms will make a big difference to your finances. It could also mean the difference between paying off and keeping your home or being trapped in a house you can’t afford.

In this post, we’ll look at how to choose the right mortgage before you look for a home, so you can make a smart loan decision and eventually become financially independent.

What is the Best Type of Mortgage Lender?

When you’re looking to borrow money to buy a home, one of the first things you should do is find the best people to loan you the money.

You have choices when you’re shopping for a home loan. Here is a general list of the types of companies to help with your loan:

  • Big Bank. The industry classifies banks like Chase, Wells Fargo, and Bank of America as direct lenders. Pros of dealing with a big bank are that there are plenty of people who can get your questions answered. Large direct lenders like these are also more likely to have resources and be a one-stop shop. However, working with a large staff isn’t always good. Your file could end up on several desks, and this could increase your closing time.
  • Small Local Lender. You may want to use this type of direct lender if your home purchase requires special attention. They may offer more flexible lending or approve an irregular income situation such as self-employment. A small local lender may be more willing to work with you if you have unusual needs.
  • Mortgage Broker. A mortgage broker acts as a middleman between you and the lender. He or she will gather information about your budget, credit score, how long you intend to own the house, and other details. A mortgage broker may be able to find you a lower rate than normal because they’re shopping for you with experience. The downside is that using a third party could mean that your file will get passed through several hands, and you may experience a lack of control. You might also find a less-than-reputable broker.

Ultimately, you want to choose a reliable lender who will give you the best rate. Contact each of these types of companies for a rate quote and to get a feeling of how they treat you as a customer. Make sure they’re organized and that they specialize in residential properties. You’ll want someone who can help you understand the application process and who won’t take longer than 45 days to close.

Should You Choose a Fixed or Adjustable Rate?

One of the first questions that will arise is whether you want a fixed or variable interest rate. The answer depends on how long you intend to live in the house.

Fixed rate mortgages have only one interest rate that will not change for as long as you have the loan. These loans are excellent for people who plan to live in the home long term. The fixed rate loan carries no surprises and is easy to work into a budget and retirement plan.

Variable rates can vary during the life of the loan. They may offer an attractive low rate at the beginning of the loan, but they could grow higher and leave you in financial distress. These types of loans are best for people who don’t intend to live in the house very long. If you think you’ll sell the house by the time the rate rises, this loan could be a good option for you.

Conclusion

The type of lender and the terms you choose have a major effect on your financial future. If you consider that the money you put toward your housing cost is about 30%, you’ll want to have the cheapest loan possible from the most reliable lender.

Having control over your house payment and getting terms that fit your budget is a major step to becoming financially secure. Signing a loan with the right terms can save you from being behind on bills and being able to save for other things like your children’s education.  It also means you can rest assured knowing you can make payments without risking repossession of the home you’ve worked hard to get.

Are you thinking about buying a home soon? Which kind of mortgage and lender will you choose to finance your home?

The Easiest Budget Known to Man: the 80/20 Budget

Budgeting can suck.

I have tried budget and budget and end up just abandoning most of them. Usually, they are just too damn complicated.

This is why I moved onto the 80/20 Budget – what I believe is the simplest budget known to man (aside from no budget, of course).

How the 80/20 Budget Works

The 80/20 Budget is almost too simple. It only includes 2 categories. Here is how it works:

20

The 20 part of the budget is what put towards savings. You should automatically take this money out of your paycheck and other forms of income so you know that this money is hitting savings. 20% really isn’t that much but if you don’t make absolutely sure that you are putting this money aside, there is a good chance you might end up dipping into it when you’re not supposed to.

Note: 20% is only a guideline. You don’t have to only save 20%. Feel free to save as much as you want – this is just a general recommendation.

80

So what’s left for the remaining 80%?

Well…everything else!

That’s what makes the 80/20 Budget so great – you only have 2 categories that are both very simple.

The 80% includes rent, food, clothes, utilities, and everything else you can spend that hard earned money on.

If you aren’t too big on tracking where every dollar goes, you may find that this budget works for you. As long as you aren’t late on rent, miss your credit card payments, or anything like that, then you should be fine.

Just take out the amount you have designated as savings from your checking account and leave the rest. If you can keep it positive, then you are doing alright! If not, you may want to set up a few more categories (such as necessities and luxuries) to track your spending a bit better.

Last Word

I really love the 80/20 Budget. It is the first budget that I have been able to stick to and don’t feel restricted by.

How about you? What kind of budget do you like to use?