Pros and Cons of a Bi-Weekly Mortgage Program

When a borrower enters into a contract to make bi-weekly payments on their mortgage, the amortization schedule is accelerated. For example, with a 30-year amortization schedule, the borrower makes 12 payments per year. In a bi-weekly arrangement, the borrower makes 26 ‘half’ payments, which allows the loan to be paid off in 22.8 years instead of 30 years. It’s the same as making 13 monthly payments.

This ultimately saves the borrower thousands of dollars in interest rate fees. However, bear in mind that bi-weekly programs usually have some type of setup, transaction, and maintenance fees associated with them. A custodian manages the bi-weekly payments in a trust account (and also makes a profit on the interest accrued there). Because the lender really doesn’t accept partial payments, this middle man is still making monthly payments to the lender on some type of pre-payment schedule.

It is important for the consumer to know that the same results can be achieved without hiring an outside company to do this. As long as your loan program carries no pre-payment penalty, pre-payments can be made on a monthly or annual basis to shorten the loan term to save money on interest or remove PMI charges on loans that have less than a 20% down payment. The borrower simply needs to indicate the extra payment is being made toward the principal balance, and have the discipline to make these extra payments as scheduled.

Qualifying for a Home Loan

Consumers who have been limited by their credit score in the past should ask a mortgage professional for a credit review. When it comes to credit, a lot can change in just a few months. Borrowers may be pleasantly surprised by what they can now afford to purchase or refinance in today’s real estate market. More importantly, consumers may find that the information that appears on their credit report is incorrect – or even worse, that they’ve been a victim of identity theft. If these or other credit problems do exist, an experienced mortgage professional can provide the information and tools needed to reduce or repair these issues.

Remember, many lenders are now using automated underwriting, and the mortgage application process has been streamlined. If a consumer has reasonably good credit, he or she may be required to provide little or no documentation beyond one bank statement and the most recent pay stub. In some cases, these requirements may even be waived completely.

If the borrower can’t provide documentation at all, mortgages now exist that offer stated income and stated asset processing styles. If the borrower is uncomfortable with stating income and assets, a no documentation loan may be the program to pursue. All this loan requires is basic personal information, very good credit, and the necessary down payment. Some lenders even allow No Doc loans with as little as 5% down!

Ten best cities for rising home values

Business 2.0 magazine ranks the top 10 cities for buying property now.
Experts say that while these locales may not be immune to the current
housing malaise, eventually property values in these places, for a
variety of reasons, are likely to zoom.

Here’s the list, along with the projected gain in home prices:

1. Panama City (FL): 72 percent projected gain in home prices over
five years. A new airport that will be built next year will open the
area to vacationers and residents.

2. Vero Beach (FL): 64 percent. Demand for housing along with moderate
property taxes and beautiful weather will drive growth.

3. Bridgeport (CT): 63 percent. Proximity and the staggering home
prices in other parts of Fairfield County are making this hardscrabble
area appealing to New York City commuters.

4. Lakeland (FL): 59 percent. This growing area is only 30 minutes
from Tampa via Interstate 4, but prices are 80 percent lower.

5. McAllen (TX): 57 percent. A Hispanic baby boom and rising incomes
are driving demand for bigger homes.

6. San Luis Obispo (CA): 40 percent. Compared to southern California,
the prices here are low and the developing wine industry adds to the
appeal.

7. Wilmington (NC): 37 percent. With great golf, mild weather and its
proximity to water, this area is a great retirement community.

8. Manchester (NH): 35 percent. This city was the winner of Money
Magazine’s best place to live in America. It’s within commuting
distance of Boston, but home prices are a fraction and there’s no
income or sales tax.

9. Fort Collins (CO): 28 percent. This winner of many best lists has
great schools, low crime and good jobs – plus 40 parks within the city
limits.

10. Atlanta (GA): 24 percent. Commuting is a bear here and many
newcomers to the area are driving up prices in close-in suburbs as the
area’s overall economic fortunes continue to rise.