HOW PAYING YOUR MORTGAGE BI-WEEKLY CAN SAVE YOU MONEY!

 

When you purchase a home and secure a mortgage, you may find that your payments are due monthly. This is the default setup, although there is another way that you can opt to make your mortgage payment: bi-weekly payments.

With a traditional mortgage, you make 12 payments a year. By enrolling in a bi-weekly payment plan, you're paying half of your mortgage payment amount once every two weeks instead. Since there are 52 weeks in a year, it works out to you making 26 bi-weekly payments or 13 months of payments. You end up making an extra month's payment, and even though this might not seem like much, over the course of the loan, it has huge effects.

For instance, say you have a 30-year mortgage for $100,000 with an interest rate of 6.5%. During the lifetime of the loan, you will pay $127,544 in interest. Adding that to $100,000 principal means that you will make a total payment of $227,544. If you pay half of the regular monthly mortgage bi-weekly, the interest drops to $97,215, which saves you $30,329.

One aspect to keep in mind is that some lenders will let you convert your traditional mortgage payment plan to a bi-weekly one for a fee. Make sure you read the fine print in the contract to determine if your lender charges a one-time fee or a recurring one. 

If you have further questions on how to make bi-weekly payments work for your mortgage, reach out directly to a financial planner or advisor. They can help you figure out how to set up the payment plan if this option works for your current situation.

Sources: Nerdwallet.com, Mortgagecalculator.org, Magnifymoney.com, Goldstarmortgage.com 

 

 GUIDELINES LENDERS USE TO DETERMINE A STRONG BUYER

 

                        

When It comes to evaluating the creditworthiness of buyers, the following are a few questions a lender will ask to determine if you are a strong buyer.

  • Do you have a credit score above 600?
  • Have you had a bankruptcy or foreclosure? Has it been discharged two years or more?

Employment:

  • How long have you been at your current job? Need two years to qualify for overtime and commission.
  • Do you get paid hourly or commission?

Self-employed:

  • How long have you been self-employed? You will need two years of business existence or more.
  • What is your debt-to-income ratio? (what are your current monthly payments for debt)?
  • If you plan to use USDA financing, 41%
  • Conventional Financing 45%
  • FHA/VA up to 57.99%

How large of a downpayment are you planning on?

  • Conventional- If you have owned a home in the past 3 years, 5%
  • First time home buyers 3% down
  • Regular 20% down
  • FHA- 3.5% down
  • USDA/VA- 0% down
  • These rates are based on certain eligibility requirements that might change from time to time.

These are just guidelines to give you an idea of what will be asked, and we recommend you talk directly to your lender to better understand buyer qualifications and how it helps you. If you do not have a lender, we will be happy to recommend a couple.