Bi-monthly Mortgage Payments: What You Need to Know

Similar to the way it sounds, a bi-monthly mortgage is paid every two weeks instead of once a month. One-half of the monthly payment is paid during these two payments, so instead of 12 payments per year, you end up making 26 installments per year. At the end of the year, this equates to making one extra mortgage payment per month, which deducts directly from the principal balance of your mortgage.

Is this a good thing, a bad thing or neutral?

The Good, Bad and Ugly of Bi-monthly Payments

Bi-monthly mortgage payments can reduce your principal mortgage balance faster. And, yes, bi-monthly mortgage payments can shorten the term of your loan. Bi-monthly payments can even save you money in interest in the long run. Whether or not this option is good, bad or ugly depends on several factors, but the biggest factor is how your mortgage company handles the payments. Typically, you cannot take upon yourself to set up your own bi-monthly mortgage payment schedule. The mortgage servicing company probably has a bi-monthly payment option, but it’s going to cost you to establish it.

Generally, this fee tends to outweigh the benefit, which means it may not be worth it you’re your company does not charge a pre-payment penalty and allows you to pay every two weeks instead of monthly, then you can take advantage of the benefits of a bi-monthly program you set up for yourself. Another option, if you can afford it, is to place 50% of your mortgage payment into a special bank account each time you get paid. When your mortgage payment is due, use all of the money in the “mortgage bank account” to make a mortgage payment. If you get paid on a weekly basis then this equates to one extra payment a month or 12 extra payments a year.

Before you establish your own bi-monthly mortgage payment program, check with your mortgage lender to see if they offer a bi-monthly payment options and if there are any fees associated with it. If they do not have a program, inquire as to whether or not you can pay twice a month instead of once a month and see if there are any pre-payment fees for reducing your principal mortgage balance early.

Once you have the answers to these questions, you can truly assess if a bi-monthly mortgage payment option is good, bad or ugly for your personal financial situation.

Financial Help Resources You Want on Your Side

If you've become a victim of identity theft, the Identity Theft Resource Center provides free victim assistance. You can also give them a call at 1.888.400.5530.

If you suspect or are a victim of mortgage fraud, contact Freddie Mac or NeighborWorks America for information on predatory lending.

Before you decide to work with a financial advisor or investment broker, do a broker background check first with the Financial Industry Regulatory Authority or call 1.800.289-9999.

Technology Can be Hazardous to Your Credit Health

According to the Federal Trade Commission, more than 9 million Americans each year are victims of identity theft. The ease of technology adds to the hazard because once the thieves get a hold of your information, they can quickly and easily go online and apply for new credit in your name.

4 Ways to Protect Credit Online

* Never give out your social security number unless you know who you're providing it to
* Only shop secure websites where your information is encrypted
* If a company calls you on the phone asking for personal information, tell them you'll call back. Then hang up, find the phone number listed for the creditor and call back. Scammers try to identify themselves as one of your creditors in order to get information from you they can use.
* When you receive an email from a creditor asking for personal information, rather than click on a link in the email, type the web address in yourself. This helps you avoid providing personal information on a phishing website.

Tips for Getting Good Advice on Home Loans

Whether you’re a first time buyer or an old pro, there are always things you can learn to be a better shopper for home loans. There are various sources you can turn to for professional advice such as mortgage lenders, banks and mortgage brokers. The thing is you should be educated enough on your own to know right from wrong before relying solely on the advice someone else gives you.

Especially with the recent problems the lending market has faced, it’s more important than ever to be a savvy home loan shopper. Being in the know helps you to avoid being scammed or misled by professionals in the industry that may have lost their scruples.

Where to Turn for Professional Advice
• Real estate attorney: While hiring a real estate attorney to represent you in a real estate purchase does cost you, it tends to be well worth the investment. The attorney, paid by you, typically works with your best interest in mind and can help you to finalize financing that is beneficial for you and your personal financial situation.
• Recommended mortgage brokers: There are a multitude of talented and professional mortgage brokers in this country. There are also some predators that are more interested in churning a commission than they are about what’s best for you. If you choose to work with a mortgage broker, get a recommendation from friends, family members and co-workers that have used a broker to buy or refinance a property. People only recommend those they’ve had a positive experience with, so it reduces your chances of being on the losing end.
• Bank you have a relationship with: Chances are good that you have an existing banking relationship. Most banks also provide mortgages and home loans. An existing relationship can work to your advantage—helping you get approved faster and with better terms and prevent you from being scammed on your mortgage financing.

Foreclosure Buyers Beware: Don’t Buy at Auctions

Foreclosure rates are at an all-time high and many real estate investors are using this an opportunity to buy properties at bargain pricing. While buying low and selling at a point in the future for a higher price can be a reality, it's not something the novice real estate investor should necessarily consider. If you're an uneducated buyer, foreclosure properties can become a money pit and eventually wind up damaging your credit and your finances.

Unless you're a huge risk-taker, don't buy foreclosure properties at auctions. Foreclosure properties that are auctioned off to the highest bidder may come with liens and other legal headaches that make it less of a money maker and more of a trauma. If you're considering the purchase of a foreclosure, then buy directly from the bank holding the foreclosure instead.

Also, get financing for the purchase of the property before you start your shopping expedition. Many mortgage lenders offer mortgage pre-qualification, where you're pre-approved for a mortgage without having a specific property in mind. This can be a bargaining tool with the bank or it can put you at the head of the list over other buyers that do not have their financing in order.

Bad Credit and Your Mortgage

When it comes to obtaining a mortgage for the purchase or refinance of a piece of real estate, one of the primary factors that plays a role in the approval of the mortgage is your credit score. This doesn’t mean that bad credit borrowers cannot obtain a loan, but it’s going to more difficult and come with less favorable terms than a mortgage for good credit borrowers.

What is a Bad Credit Rating?

The recent collapse of the mortgage industry has changed the landscape of credit scores. What was once considered to be a high credit score, in the low 700s, is now considered to only be mediocre at best. Your credit is calculated using several different factors, which includes your payment history, the type of credit you have, the longevity of your credit accounts and possessing the right mixture of a variety of credit accounts (credit cards, mortgages, auto loans, student loans, store credit accounts, etc.). In today’s mortgage arena, lenders want to see a borrower with a credit score of at least 740 to be considered a great credit borrower. Below 740 to about 720 is considered good and anything falling below this is considered a bad credit rating.

Getting a Mortgage with Bad Credit

When you have bad credit, but a lender approves you for a mortgage, it usually comes with higher interests rate (anywhere from two and five percent higher than the interest rate for good credit borrowers). On top of this, traditional mortgages such as fixed rate mortgages may not be an option. Some lenders offer less favorable terms to bad credit borrowers, so you may wind up with an adjustable rate mortgage and a variable monthly payment.

How to Fix Bad Credit

If you have bad credit that is your fault—meaning you make late payments or do not make your payments at all—then the primary step for improving your credit score is to make all of your bill payments on time.

If your credit score is low but you’re not sure what’s causing it, or if you don’t know what your credit score is, then you need to order a copy of your credit report and credit score from each of the three credit agencies (TransUnion, Experian and Equifax). Review these reports carefully for negative items. If the negative items are not yours, then follow the dispute process instructions for each agency to remove the negative activity.

If the negative items do belong to you, then contact the creditors and collection agencies you have negative items with to see if you make payment arrangements or some other arrangements to take care of the debt. If and when the creditor agrees to an arrangement, be sure to obtain the agreement in writing. Also, be sure to stick to your end of the deal. Over time, these efforts will increase your credit score and make it easier and more affordable to obtain a mortgage.

Business Credit Cards & Your Personal FICO Score

There are situations where your employer pays your business credit card bills, but what happens if your employer makes late payments? How does this affect your personal FICO score? As you probably know, a few late payments can adversely affect your credit score. It’s one thing if you’re the one making the late payments. When it’s out of your control, then what?

According to Fair Isaac Corporation (FICO), late payments on your company issued credit card can adversely affect your credit score in the same way late payments on personal credit cards can. It all depends on whether or not the credit card issuer required personal information to apply for and get approval for the corporate credit card.

As you should be pulling and monitoring your credit reports once or twice a year anyway, be sure to check for the corporate card on your credit reports. If the corporate credit card is listed as one of your accounts on your credit reports, then late payments are being reported, which means your credit score may be in harm’s way. If the corporate credit card is not listed, then the activity for this card is NOT being reported to the credit agencies on a monthly basis.