Believe it or not, working a blue-collar job has its advantages, though great pay usually isn’t often one of them.
Unfortunately, because blue-collar workers usually have fairly low income but do have decent job security (not likely to get fired), many blue-collar workers are attracted to 30-year fixed rate mortgages, which tends to get them more house for a lower monthly payment than other options.
In this article we’re going to talk about some good mortgage choices you can make as a blue-collar worker.
Don’t Fool Yourself Into Buying More House Than You Can Afford
The reason why it’s unfortunate that most blue-collar workers choose 30-year fixed mortgages is that they end up buying more house than they really should. With the small income that many blue-collar workers get, having it heavily influenced by interest on a mortgage can hurt any attempts at building wealth.
You’d potentially be in a better situation getting a 15-year fixed or a VA hybrid ARM (if you’re eligible for a VA loan) on a cheaper home than getting a 30-year fixed on a bigger home in a nicer neighborhood.
You’ll also be much more likely to be able to afford that bigger house sooner if you start with a smaller home with a better loan. Because you’ll accrue equity much faster, you can save for a much bigger down payment on a bigger home.
Don’t Sacrifice the Long Term in the Name of the Short Term
The long term and the short term are not mutually exclusive; you can protect both. How? By choosing a VA hybrid ARM or a 15-year fixed-rate mortgage. What you want to try to do is make sure you’re paying more principal than interest with each monthly payment. That is virtually impossible on a 30-year fixed unless you pay a fair amount extra every month, which defeats the purpose of having a low minimum payment.
Paying more principal than interest each month sets you up both in the short term and the long term. Short term because you’ll choose a loan option and a home that is appropriate to your income (so you won’t default on your payment), and long term because you’ll be racking up equity in your home a lot faster, so 5 or 10 years down the road you’ll likely have a significant amount of money in your home that you can use for all sorts of things.
Got Questions? We Have Answers
If you’d like to learn more about your options, our team at Low VA Rates can help. We’ve been working with veterans for over 10 years and focus on educating them about the process so they can make the best choice for their situation.
Feel free to give us a call at 866-569-8272 or visit our website today.