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One of the most common questions I get is:

How can I refinance my loan without increasing my principal balance?

There are three things that go into establishing a loan amount:

  1. The principal balance on the existing loan – Which will also include any payoff fees they charge as well as interest due on the loan.
  2. The amount of closing costs for the option you choose.
  3. The pre-paid set up, which includes establishing an escrow account for tax and insurance payments as well as interest from the day you close through the end of the month. Mortgage interest is always paid in arrears.

Step 1 – Choose a No-Cost Loan

The first step is to choose an interest rate that has $0 fees which will equate to zero closing costs. This is what we term a “no-cost loan”. This will eliminate option #2 above.

Step 2  – Escrows

The second step is to avoid having to bring cash to close. I suggest adding the new escrow account set up to the new mortgage. Then, when you receive your current escrow refund, you can apply this as a principal reduction on your first payment of your new loan. If you do not currently have an escrow shortage, the amount needed to establish an escrow account should be in line with the amount you have in your current escrow account. This takes away the escrow part stated in c above.

Step 3 – Interest

And lastly, the interest due on the current loan (a), as well as the interest due on the new loan (b), will account for just over one month of interest. Since this is interest that you would pay regardless, it isn’t a fee for doing a new loan. It is just changing where the current payment due on your existing loan is being sent. As a result, you will end up missing one mortgage payment. The solution to not have this one month of interest impact your ending mortgage balance is to make the additional payment that you will be missing as a principal reduction to the first mortgage payment due on your new loan.

In short, by choosing a no-cost loan and applying the escrow refund as well as the missed payment to the first payment on the new loan, you will owe no more on your new loan that you owe on your current loan. In the end, it will not have impacted your expected cash flow, so you will be in the exact position as you are in currently.

A VA loan, or a mortgage backed by the Department of Veteran Affairs, can be an enormously beneficial part of buying a home for a veteran or their family. These loans come with lower interest rates than conventional loans and often no down payment, despite the fact that there’s no mortgage insurance requirement.

At City Creek Mortgage, we’re proud to provide the ability for you to get or refinance a VA mortgage loan. We often get questions from veterans or their families about standard eligibility for these loans – let’s take a look at some of the basics.

Basic Eligibility

You’re entitled to apply for a VA loan if you’re on active duty or have separated from military service under an “other than dishonorable discharge,” per the VA. In addition, some other requirements:

  • Veterans must meet length-of-service requirements
  • Service members on active duty must serve for a minimum period
  • Reservists and National Guard members may be eligible
  • Surviving spouses of deceased veterans may qualify

General Requirements

While the requirements for VA loans are much more relaxed than in a conventional loan, there are still a few important areas to consider:

  • Credit score: The VA doesn’t set a minimum credit score, but it requires lenders to review a full financial profile. Each lender will have a different exact minimum score.
  • Debt-to-income ratio: The VA also doesn’t specify a number here, but if this figure is over 41 percent, the lender will need to provide proof of the borrower’s ability to repay.
  • Lender requirements: Lenders can add overlays, or additional requirements, to VA loan qualifications.
  • Down payment: In most cases, you don’t need to make a down payment for a VA loan. If the purchased price of the home is greater than its appraised value, though, you may have to make up this difference.
  • VA limits: The maximum VA loan limits the value of a home that can be purchased without a down payment. In 2017, this number has been $424.100, though the exact figure varies by county.
  • Property requirements: The VA has strict property requirements, including safety, living conditions and compliance with building codes.
  • Fees: There will be a funding fee for VA loans, even though there’s no mortgage insurance requirement. This amount will range from 1.25 percent to 3.3 percent of the total loan amount. This fee is often simply added to the loan amount, rather than being paid up front.

Certificate of Eligibility

To get a VA loan benefit, you have to get a certificate of eligibility from the VA. There are three ways to do this:

  • Use your eBenefits account
  • Get a VA-approved lender to obtain it for you
  • Complete a request for certificate of eligibility form and mail it to a regional loan center

For more on VA loan eligibility, or to find out about any of our other mortgage services, speak to the experts at City Creek Mortgage today.

You may have read the news that at its June 2016 meeting the Federal Open Market Committee (FOMC), a subgroup at the U.S. Federal Reserve (often called “the Fed” for short), decided to leave interest rates unchanged. Some members of the group signaled that they may still raise rates once or twice before the end of the year, though, so if you are thinking about purchasing a home, being able to understand why interest rates go up and down can help you decide if now is the right time to buy, or if it might be better to wait a little while and hope that rates go down.

Crash Course in Interest Rate Economics

The main driver for any interest rate changes is the economy, and generally speaking, the FOMC makes its decision on whether to raise, lower, or keep interest rates that same based on economic data and forecasts for things such as hiring in the labor market, total economic growth, oil prices, and consumer spending power. Since some of these things are very difficult to predict far in advance, the FOMC meets about every six weeks to assess the economy and discuss policy options.

Examining Market Factors

Oil prices dipped in 2015 and while they have increased slightly since the absolute low from last year, there are reports that this year we will see the lowest summer gas prices in more than a decade, averaging just $2.27 a gallon. For the average driver, this signals good news for your wallet, but lower prices also mean a slowdown for the job growth in the energy sector, which was a major job driver for the past few years. As with any significant reduction in hiring and job growth, this can impact interest rate changes.

Inflation is another factor that the FOMC usually looks at the determine whether to raise interest rates. Inflation causes money devaluation—meaning that $100 will buy you less tomorrow that it does today if inflation goes up. When inflation is low, investors can make a better net return from their overall returns than when inflation is high. With inflation only rising at about 1.6 percent a year, well below the Fed’s target of 2 percent, it seems likely that interest rates will remain low.

Supply and demand also plays a factor, since interest rates can be boiled down to the cost to borrow money. If there is high demand and many people who want to borrow money (as there would be in a strong economy), the price to borrow will go up. When there is low demand (as there is in a recession or during slow economic growth), the price to borrow money will go down or remain low.

Determining when interest rates will change is difficult, even for the most seasoned policy and lending experts. For that reasons, most mortgage loan advisors would recommend that you take advantage of the current low rates right now rather than waiting and hoping that they will go even lower. Talk to the experts at City Creek Mortgage today about whether a no-cost refinance loan is a good option, or whether it’s time to take the leap and buy a home instead of renting.

With a report that stunned the markets, the Bureau of Labor Statistics (BLS) announced this morning that only 38,000 new jobs were created in the month of May. This was much weaker than the 158,000 number that was anticipated by the markets.  In fact, this was the lowest job report we have seen since September of 2010, which was a terrible time in the US economy. For a month that is typically adding seasonal jobs to staff up for stronger summer months, this was a tremendous disappointment.  As if that wasn’t bad enough, there were downward revisions to the prior two months’ reports totaling a combined 59,000.

 

In an effort to put a positive spin on the overall report, many pundits are focusing on the decrease in the Unemployment Rate which fell from 5.0% down to 4.7%. However, the reality is that the number fell solely as a result of 458,000 people leaving the labor force. This artificially makes it appear as if there was significant improvement in the US economy. The reality is that we now have more people who will be either dependent upon social services or will be using savings to support their living expenses. Either way, it amounts to fewer people paying into a system and likely more drawing against it.

 

Although initially this report is providing a boost to mortgage bonds, the fear will be that it will cause the Federal Reserve to hold off on raising interest rates a little longer. Ultimately, that is good news for the stock market and bad news for mortgage rates. It will be interesting to see how this plays out. However, it certainly can create increased volatility.

 

With bond prices right up against a significant overhead resistance level that has stopped rates from further improvement, the potential benefit to float is minimal. Therefore, the safe play will be to lock in and take advantage of the gift this unexpected report provided.

ADP released their estimate of new job creations for the month of May this morning. As expected, they reported 173,000 new hires. Since this number nearly matched the 175,000 anticipated, there was little reaction in the bond market following the report. Most investors will wait for the more widely esteemed Bureau of Labor Statistics (BLS) report that will be released tomorrow morning. Although the BLS and ADP reports tend to even out over the long run, they have been known to vary dramatically from one month to the next. However, they have been more similar in the most recent months. For the sake of maintaining low mortgage interest rates, the hope is that the report will not show a significantly higher than expected number. If it does, a bond market sell-off can be expected, which will increase the APR on most mortgage loan options.

 

Mortgage bonds ended the day yesterday beneath their 50 and 25 day moving averages. It is common for the bond market to experience an increased level of volatility ahead of the monthly job report released. Given that tomorrow will be the release of the BLS report, we can expect the volatility to continue today. Although not impossible, it would be unlikely to see any significant gains today. In fact, given that we are now back at the top of the sideways trading range, the likelihood is that mortgage pricing will be worse today and possibly experience a more dramatic sell-off before the end of trading today. Many investors will be taking their investments off the table to avoid the potential losses associated with a strong job report.

 

In light of tomorrow’s report, the safe play will be to have a locking bias going into tomorrow. If the release is strong, we could easily lose 60 basis points in the bond market. Now may not be the time to take risks for those needing to close in the near future.

Are you currently living in the house of your dreams? Is your neighborhood the one you want to be in? For many people, the answer to these questions is no, and often the thing that holds people back from deciding to upgrade their current home is the cost of a new home. While it’s always important to evaluate your current financial situation before you make any decision to upgrade to a larger home or a better neighborhood, there are some potentially overlooked financial advantages to taking the leap sooner than later.
<h2><strong>Evaluating Your Financial Situation</strong></h2>
Upgrading to a larger home or a more expensive living area is going to come with an increase in your total monthly payments, and there is pretty much no way to get around that (unless you have a big pot of money you’re just looking to spend and can put a huge down payment on the new home). Because of that, it’s important that you take a critical look at your finances and talk to a lender about the cost of the new home to make sure you can afford it. If you are able to upgrade without impacting your overall budget, there can be some significant financial advantages to an upgrade.
<h2><strong>Freeing Up Cash for Your New Home</strong></h2>
Perhaps one of the top reasons that homeowners look at upgrading their home as an option is the impact it can have on cash flow. For many families, monthly credit and other debt obligations can make it difficult to afford a better home, and often these monthly bills are paying for depreciating assets or consumer debt, such as vehicles, boats, ATVs, and revolving credit accounts. These debt payments can prevent you from investing in other things that are likely to increase in value over time, such as a home or retirement account.

For homeowners who currently have equity in their home, selling your home could free up enough cash for you to pay down your other debts and finally be able to afford the upgraded home that you have always dreamed about. If you decide to go this route, though, it’s important that you avoid falling back into significant debt after you purchase a new home.
<h2><strong>Playing the Long Game</strong></h2>
While many people talk about real estate as an investment, and count it as an “asset” when analyzing your financial situation, it’s important to note that while you live in the home, and until the mortgage loan is paid off, there are still expenses associated with this investment. Even calculating the total net cost of an upgrade, weighing the increased monthly mortgage payment against the principal reduction, appreciation, and tax savings, and the projected future value, means approaching your financial gains as something you can achieve several years (even decades) from now, rather than an immediate cash benefit.

It’s important to consider all the relevant factors, and honestly assess your personal financial situation before deciding whether a move is the right choice for you. If it is, talk to <a href=”https://citycreekmortgage.com/”>City Creek Mortgage</a> about getting the best mortgage loan terms and rates.

Yesterday’s bond market trading ranged from dropping below the floor of support, climbing above the ceiling of resistance and settling back down beneath the ceiling provided by the 50 day moving average.  The volatility was across the board and triggered mixed news in the market as well as the US stock market having hit a critical ceiling and not having the strength to continue higher. Overall, this shows a resilience in the bond market that is much needed in order for mortgage interest rates to hold their ground.

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Several high profile bond investors, including the legendary Bill Gross, are shifting their trades to better prepare their portfolios for a string of looming increases to the Fed Funds Rate. Over the past six-plus years, individual investors have had a difficult time earning a reasonable rate of return without facing the significant risks associated with buying more volatile asset classes, such as stocks. By holding short term rates this low for an extended period of time, it could ultimately create a situation that could further hurt the US economy. Therefore, it is widely believed that the Fed will have no other option but to raise rates at a reasonable pace in order to avoid a more serious financial crisis in the future.  As we all witnessed in December when the Fed made their first move, this could cause a crisis in the stock market and actually help drive mortgage interest rates lower.

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At this point, it is too early to call this a break out.  The market could quickly shift and force bonds beneath the ceiling they surpassed in early morning trading. If you choose to float, do so only if you are able to keep one eye on the markets. Be prepared to lock if prices make a break lower.

‘Lackluster’ continues to be the best way to describe the performance of mortgage bonds, as we wake up to more of the ‘same’ in early morning trading.  Bonds continue bouncing between support of their 100 day moving average and resistance of their 50 DMA. This range has at least helped mortgage rates from deteriorating too much, as the 100 DMA has proven to be a strong level of support. However, the risk of bonds making a break lower is increasing as the day wears on. Will today be the day we see the APR on mortgage loans move higher?  It is certainly a possibility. We will have to wait and see.

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A shrinking stockpile of oil is contributing to continued rising prices, with oil surpassing the $50 per barrel mark for the first time in six months. There are signs of a two-year surplus finally coming to an end, which is great news for energy related businesses. Prices are now up more than 80% from the low of $27.10 we saw in the month of January. Commodity prices overall have experienced significant advancements over the past couple of months. This does not bode well for mortgage interest rates, as increasing commodity prices trigger higher levels of inflation. Although inflation levels are still expected to be below hoped for levels, the increase in inflation levels will be a difficult pill for the bond market to swallow, and higher mortgage interest rates may be the short term impact.

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With bonds continuing to show weakness, we will maintain our locking bias. There is certainly a hope that bonds will bounce off of their 100 day moving average and make a run higher. However, it’s too risky to float in hopes of a run higher at this time.

The second look at first quarter 2016 GDP showed a growth rate of 0.8%. Although hotter than the initial read of just 0.5%, it was below the markets’ expectations of 0.9%. Clearly, this is not a strong report and does not show sufficient growth in the US economy to justify a Fed rate hike. However, when you combine the tremendous job growth we have experienced the past couple of years, along with the prospect of higher inflation, the likelihood is that we will see a rate hike at the next Fed Open Market Committee meeting that includes a live statement from Fed President Janet Yellen. However, because that will also depend upon further substantiated growth in the US economy, that is not a preset conclusion.

 

Since the GDP report came in right near expectations, the reaction in the bond market has so far been muted. Since most economists are expecting a reading of greater than 2.5% for the current cycle in which we are now in, the anemic report from today is somewhat discounted. As we approach the strong economic times of summer, we can almost be certain of increased chatter of an imminent rate hike in the coming months, which could cause continued volatility in both the stock and bond markets. For now, we remain trapped between a floor of support provided by the 100 day moving average and a ceiling of resistance by the 50 DMA. Since both levels are considered to be strong, we may need to wait for a bit before bonds can decide on which direction to take in the near term. Continued chatter of a Fed rate hike could strengthen the US dollar and pressure oil prices lower. This would help support lower rates and could drive the US stock market a bit lower.

 

Given that so far today we are seeing “more of the same” in the bond market, there appears to be very little incentive to float. Therefore, we will maintain our locking bias.

You’ve made the decision to buy a home. This process can be both nerve-wracking and exciting, especially if it’s your first time. You might not know what to expect and feeling uncertain. Most of your concerns can be put to rest once you do a little homework. Follow these 4 tips to ease your worries and help the process run smoothly.

Check Your Credit Score

One of the most crucial factors to qualifying for a mortgage is your credit score. Evaluate your credit report and look for collection accounts, unpaid accounts, and mistakes. Knowing your credit score will help you prepare for purchasing your new home because you know where you’ll stand.

Analyze Your Liabilities and Assets

Keeping track of your monthly cash flow is important. Take time to understand your spending habits and what your budget looks like. Knowing where your money goes will help you save better for your first home. Knowing your liabilities helps in being prepared. For example, self-employed individuals may need to show a longer history of earnings to qualify for a loan.

Organize Your Documents

Documenting your taxes and income is required for homebuyers. Here are some documents you’ll likely need to show mortgage lenders:

  • W-2s from the last 2 years
  • Tax returns
  • Bank statements from the last 2 months

Mortgage lenders look for nonsufficient funds or if there are any odd trends of money going in or out. Having these documents ready before you start actively searching for a home will save time.

Know Your Down Payment

Make sure you’re ready to make a down payment. If you’re not able to do this on your own, you may qualify for assistance loans. This can help take the edge off of the down payment and secure your new home.

As you can tell, it only takes a few steps to ease some of your anxieties about buying a home. Preparedness is key and City Creek Mortgage can help. Follow the above steps to save time and be ready to qualify for a new home.