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Short Mortgages: The New Wealth Builder Home Loan

Patricia Eisenhauer's picture

Leave it to the banks to invent yet another way for people to buy houses that they really cannot afford. The newest addition to the mortgage smorgasbord is a WBHL.

This little delicate morsel is a Wealth Builder Home Loan. Being introduced by Citi Bank and good old Bank of America, the WBHL offers an interest rate less than 1% to a qualified buyer. Note the description, “qualified buyer”. The loan is in competition with a 4% 30 year fixed rate mortgage. Of course this loan is a 15 year mortgage, which means you pay every two weeks. You don’t pay as much but you pay more often. How does this help a low income prospect?

I also read that the buyer pre pays the interest up front. How then can it require little or no down payment?
One of the other “advantages” is that this loan welcomes buyers with lower FICO scores. Where are we heading with this? Of course it opens the range of prospective buyers. The banks will be servicing low income and first time home buyers. What ever happened to save up enough money to make a down payment and buy a home?

The advantage of the WBHL is that in the first three years the homeowner will have a 77% payment on the principal as opposed to the 68% of a fixed rate 30 year loan.

Ah ha, did you read that fixed rate notation? This means that our super swift WBHL also contains increases in the interest rate.

Apparently you, the home buyer, will pay off the principal sooner. Supposedly you will have more money in your pocket once the mortgage is paid down.

Historically (over 50 years) the US Housing policy has relied on looser and looser underwriting standards. Why is it then that according to statistics presented at a recent meeting of nationwide mortgage service organizations, our nation’s home ownership is similar to 1962.

Planning to buy a home? Please, please compare all of the costs involved. All too often you will hear the phrase “no money down.” When presented with the actual figures you will see origination fees, appraisal fees, survey fees, inspection fees and with this WBHL the interest is to be paid up front. Sure, most of these expenses can be “rolled” into the mortgage. That way you will have a larger mortgage. Don’t forget you will also have taxes and insurance to pay yearly monthly.

I do not mean to discourage anyone (who can afford to) from buying a home for their family. Therefore I suggest you meet with your friendly banker or mortgage lender, or perhaps a realtor too. Create a business plan for the future purchase of your home.

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