City Creek Mortgage News

At City Creek Mortgage, we’re here to help you understand all the basics of a given mortgage loan if you’re buying a home. This is one of the biggest financial commitments you’ll make in your entire life, and you need to have a clear picture of the rates available to you and all the other important financial details.

One of the biggest questions many clients have here: What are the basics of a given mortgage payment that I’ll make each month? Let’s go over the primary financial elements of a mortgage payment, plus a few options you have in this arena.

Elements of a Payment

There are four primary elements of a mortgage payment, which is generally due on the first of each month. These elements are:

  • Principal: Principal refers to the part of your monthly payment that goes toward the actual remaining balance. As you move into later years of your mortgage, a higher and higher percentage of the principal amount will be paid off with each payment.
  • Interest: This is the fee that you’re charged by a lender for borrowing this money, a rate that’s set during your approval process. The best way to view interest is in APR (Annual Percentage Rate) format, which includes mortgage insurance and any fees that were folded in.
  • Taxes: Monthly property taxes can also be part of the mortgage payment.
  • Insurance: In many mortgages, the buyer will also have to purchase homeowners and/or private mortgage insurance.

Taxes and Insurance Options

The last two sections mentioned above, taxes and insurance, come with a few options as to how they’re paid. Here are the most common options:

  • Holding in escrow: This is a format where your lender gets your tax bills and any insurance bills, then estimates a monthly amount that will be needed to cover them. Each month, they’ll collect that as part of your mortgage payment and hold it in an escrow account, to be paid as these bills are due.
  • Self payment: A format where you actually pay taxes and insurance bills yourself, directly. These payments often aren’t monthly or on the same schedule as standard mortgage payments, though, so remember to be diligent about due dates.

For more on the basic elements of a mortgage payment, or to learn about any of our other mortgage loan services, speak to the pros at City Creek Mortgage today.

There are several important factors when it comes to getting a great mortgage for a new home or refinance, and one of the biggest is the down payment. While you obviously want to get the best mortgage rate possible, the amount you spend up front on your down payment is generally the single largest bulk spend during this process.

At City Creek Mortgage, we can help with all down payment-related areas. Unfortunately, a number of misconceptions have formed in the mortgage world surrounding down payments, and these often misinform buyers. With that in mind, let’s look to debunk a few of these down payment myths.

10 Percent Minimum Requirement

According to a study by NAR, well over half of first-time homebuyers are convinced that without a 10 percent down payment on the principal loan amount, they will be totally blocked from obtaining a mortgage for a new home. Simply put, this is false.

Average down payments for all loans today range between 5 and 10 percent of the principal total, with some programs offering down payment options as low as 3 percent. There are even some special options that come with no down payment requirement whatsoever. An assumption that you can’t get any kind of mortgage without 10 percent down could keep you from finding a lot of great home options.

Mortgage Insurance Requirement

Another related myth is that if you don’t have 20 percent to put down up front, you’ll automatically be required to purchase private mortgage insurance (PMI). But again, there are several loan programs that do not require this, including VA loans and other types – some with no PMI and others with significantly reduced rates.

Private Mortgage Insurance Myths

Another myth about PMI is that it protects the buyer, their home or a potential foreclosure situation. This isn’t the purpose of private mortgage insurance – rather, it’s to protect the lender from default on the loan. There is no foreclosure protection. Also, be sure you don’t mix up PMI with homeowner’s insurance, which is indeed for the buyer and protects your physical property.

Another big misconception with PMI is that it cannot be canceled, but this is patently untrue. PMI is only in place to protect a lender when less than 20 percent equity has been paid or built up in the home – even if you don’t put 20 percent down up front, you’ll build this level of equity at some point during the mortgage. At this point, PMI can be removed in most cases. It will be automatically cancelled when your balance reaches 78 percent of the original value, but you can request the cancelation sooner in writing if your home value has gone up enough.

For more on the down payment process, or to learn about any of our mortgage services, speak to the pros at City Creek Mortgage today.

This year, I applied and was accepted into the Goldman Sachs 10,000 small business program. It was like getting an MBA in City Creek Mortgage from Babson College, which is ranked #1 in Entrepreneurship. The $20,000 cost was completely underwritten by Goldman Sachs and is an amazing gift to any small business owner.

This 3 month (typically 1 day per week) program was the most powerful, comprehensive and valuable education I have ever received and I’m excited to launch my new growth plan next month.

To qualify you must:

    • Own your business or be the majority decision maker
    • Been in business for at least 2 years
    • Have 10 or more employees
    • Earn over 1 million per year in gross revenue

If you would like to learn more about how the GS10KSB program can help you grow your business, you can contact Contact Mike Ballif at or 801-957-5396. Tell him Tobi sent you and you’ll receive extra special attention. ☺ I’m also available for any questions. #ContinuousImprovement

Graduation Day abd Tobi is voted as the Goldman Sach’s valedictorian speaker for graduation. Thank you to Gretchen Figge for sweetly insisting Tobi join her in this program. 

As a bit of a contrarian, whenever things start to look too good, I begin to question the future. And given the strength of the market since the housing meltdown reversed, now is a prudent time to begin closely watching home value appreciation for any signs of a bubble.

I’m not saying I believe a correction in home values is imminent in the near term. It will happen at some point, but no one can say when with any certainty. But any time you see unsustainable growth in the housing market, you are witnessing a bubble, and as I’ve heard it said, “Whatever can’t continue must end.” I would rather consider the prospects of a housing bubble forming within the next two to four years than ignore the potential impact entirely. But I’ll let you gauge the risk yourself.

As part of the last housing crisis, indicators of our downfall began in 2005. However, consumers continued to purchase homes at a rapid pace until 2007—and even into 2008—before it was abundantly clear that we had a big problem. Had people known what to look for in 2005, many could have avoided a disaster.

I monitor five key points relative to the ongoing strength of the housing market:

  1. The median home price in relation to consumer confidence.
    • In 2006, consumer confidence hit an all-time high, and we’re at a similar point right now. Historically, when consumers feel confident, housing prices increase. However, as the recent trend in consumer confidence has not led to a relative increase in home values, we can anticipate either a drop in consumer confidence or an increase in housing prices.
  2. The number of people purchasing homes with cash.
    • When the market is hot, more people pay cash for their homes. We’ve recently seen a drop in the number of cash buyers, indicating a potential slowing in the housing market.
  3. The housing affordability index.
    • With both mortgage interest rates and home values on the rise, the housing affordability index has taken a sharp dive to a level unseen since 2009. Homes have become less affordable.
  4. The percentage of homes that increase in value month over month.
    • Although residential housing values have increased, there are many areas where prices are flat or even declining. The peak of a housing cycle is generally reached once the percentage of homes rising in value ceases to increase. The peak in our current cycle was reached in February 2017, and although this indicator could turn positive once more, it is reflective of the situation in 2005–2006.
  5. The percentage of household income that goes toward housing expenses.
    • Growth is no longer sustainable once the average percentage of household income spent on mortgage or rent payments exceeds 25%. Currently, in 20% of the major housing markets, payments average more than 25%. This is the highest percentage we have seen in a long time.

I’m not predicting a housing crash. I believe now is still a great time to buy a home, especially if you plan to live in it for a while. The relative price difference of owning versus renting overwhelmingly supports buying a home. Markets will always go through cycles. My intention is to educate and point out some of the indicators of a bubble. Maybe my thoughts will help deter buyers whose sole objective is to own a home for its appreciation value; at some point, this kind of short-term investment will no longer be an attractive option. However, the long-term reasons to buy remain firmly in place, especially with the average 4.5% growth rate on real estate. When you do the math, owning a home is a no-brainer.

We all want the best mortgage rate when we’re looking to buy a new home, and credit is one of the single largest factors here. Your credit score plays a huge role in both the kinds of mortgage programs you qualify for and the rates you can get within these programs.

At City Creek Mortgage, we’ve helped numerous clients organize their credit in smart ways to help qualify for great mortgage loan options. Here are some common mistakes that we offer tactics to help prevent:

Maxing Out

A big reporting factor in your credit score is the percentage of your available credit that’s currently in use, or your debt utilization ratio. The higher this percentage is, the lower your score will generally be. A good threshold that most experts point to here is 30 percent – you should never be using more than this percentage of your overall credit limit.

Falling Behind

Another specific event that will lower the credit score is a missed or late payment. Given the available technology today, including the ability to automate and pay bills completely online, there should be no reason why you fall behind on these payments as long as you have your finances in order.

Closing Out

Once you’ve paid down a particular credit account, it can be temping to close that account and remove an avenue toward future spending. But in reality, this will decrease your available credit, in turn increasing the percentage of debt you’re using without you even spending a single additional dollar. Rather, keep accounts open if they’ve been paid down.


In other cases, some people will try to move all their balances to a single card – usually one with the lowest interest rate. But this can actually lower your credit score by making it seem like that card has too high a debt ratio, and it’s generally better to keep balances spread between cards.

Too Many New Accounts

Given the above information, you may be thinking it’s wise to simply open several new credit accounts but not spend anything on them – this will raise your total available debt, after all. But credit bureaus are wise to this, and they will flag your profile and ding your score if you open too many accounts in a short period of time. You won’t get away with gaming the system here, so don’t try.

For more on avoiding mistakes with your credit score, or to learn about any of our mortgage solutions, speak to the pros at City Creek Mortgage today.

With home values climbing to record highs, many have rushed to their bank to take out a line of credit against their homes. For some it has been to make home improvements or consolidate debts. For others it was to take a vacation or purchase a car.
Recent changes have made home equity loans less favorable. For one, home equity loans no longer provide a tax deduction. Secondly, most have variable rates that are moving higher with each rate hike the Federal Reserve makes. Given new tax laws and the outlook for continued Fed rate hikes, the cost of borrowing against a home equity line of credit is increasing.
In most cases, I’m not a fan of home equity lines. If they help solve critical financial issues, they are wonderful. However, most are used to spend money that a family would otherwise not need to spend.
If you have a small balance on a line of credit, focus on paying it off as quickly as possible. Make minimum payments on your primary mortgage until the balance of the credit line is paid. Then take the amount your budget is used to paying and apply that as a principal reduction to your mortgage. That will help you pay off your home faster.
If you have a large home equity line balance, consider at what point it makes sense to consolidate that into your primary mortgage. The blended rate of a home equity loan and your current mortgage is often higher than the current rates to refinance. If you need help determining what is best, we are here for you.

As a top mortgage company in Utah, we at City Creek Mortgage are here to help with every area of your mortgage loan process. We can help you get the best financing for your new home, but we can do much more than this as well – we can also help with some tactics to help pay the mortgage off quicker.

One such tactic? Making biweekly mortgage payments instead of the more standard monthly option. Let’s look at the basics of this option, why it might be right for you, and also some important words of caution in this area.

Biweekly Payment Basics

Simply, a biweekly payment refers to you sending half your mortgage payment every two weeks, rather than paying once a month. Most mortgage loans come with a standard monthly payment option, so some buyers wonder if they can even pay biweekly – the answer is almost always yes. A few options that are usually available include:

  • The lender offers a biweekly payment option
  • A third party offers a biweekly payment option on your behalf and is paid a fee
  • You handle biweekly payments on your own end

Possible Benefits

Here are the primary benefit of biweekly mortgage payments:

  • If you make a half payment every two weeks rather than one full payment every month, you’ll end up with 13 full payments made for a calendar year rather than 12. This will reduce the principal balance on your loan, which will lower your interest totals and allow you to pay the loan off sooner.
  • In many cases, paying a half payment every two weeks is much easier to budget for based on the way you receive your paychecks.

Potential Cautions

Biweekly payments might not be perfect for every situation. Here are a few basic cautions to keep in mind:

  • Make sure your lender allows these payments and applies one of them each month to the principal balance – this is instead of holding it until the other half arrives and then processing it like a normal payment.
  • If you use a third party for these payments, be diligent on your research with them. Check to make sure fees are worth the services, and ensure they are sending payments at the proper times.
  • If you choose to make these payments on your own, check with your lender first to ensure there are no penalties and that payments will be handled in the proper format.

For more on biweekly mortgage payments, or to learn about any of our mortgage services, speak to the pros at City Creek Mortgage today.

If you’re looking to buy a home but have less than perfect credit or lack the cash for a down payment, an FHA loan might be a perfect choice for you. Backed by the Federal Housing Administration, an FHA loan is a type of mortgage loan that allows for purchases with low down payments and closing costs.

At City Creek Mortgage, we’re proud to provide FHA loans in both fixed rate and adjustable rate formats. These loans are among the easiest loans to qualify for, but they do have a few important requirements that buyers and the new home must pass. Let’s look at these.


Some basics on the FHA loan:

  • Buyers can purchase a home with a down payment as low as 3.5 percent of the home’s value.
  • Pre-payment penalties do not apply.
  • Interest rates are around 4 percent on average.
  • Buyers need a FICO credit score of 580 or better to qualify.



Some important credit and financial requirements for FHA loans include:

  • You’ll have to provide a Social Security number or proof of lawful residency, along with steady income over the last two years.
  • Your front-end ratio (cost of the mortgage payment plus mortgage insurance, taxes and other fees) should be less than 31 percent of your gross income, but it can be up to 40 percent in some cases.
  • Your back-end ratio (mortgage costs in addition to spending on other debt from credit cards, student loans, etc.) cannot exceed 43 percent in most cases, or 50 percent in others.
  • If your FICO score is between 500 and 580, you can still get an FHA loan if you make a 10 percent down payment or larger.

In addition, the FHA imposes limits on the kinds of houses that you can get on an FHA loan:

  • The borrower must live in the property as their primary residence.
  • There may be limits on loan value, depending on your area – usually 115 percent of the county’s medium home price.
  • The property must be appraised by an approved appraiser in most cases.


Mortgage Insurance

In most cases when a borrower can’t put 20 percent down on the house, a conventional loan will require private mortgage insurance that will drive up the monthly payments. With FHA loans, mortgage insurance will come in two forms:

  • Upfront mortgage insurance may be paid as a lump sum or rolled into monthly costs, but will be 1.75 percent of the loan value.
  • Annual insurance premiums will be added to monthly payments. These will vary, and can range between 0.45 percent to 1.05 percent of the loan value.

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

Real estate agents have a responsibility to do what is best for their clients. However, this doesn’t always happen. Getting a mortgage is a significant decision for a homebuyer. In many cases, the real estate agent will pressure clients to use their preferred lender. Unfortunately, a referral is often made to a lender that is financially or professionally supporting the real estate agent, rather than because it is the most cost-effective solution for the homebuyer.

The Truth Behind Mortgage Rates
One of the reasons other lenders have higher rates than we do is due to the level of compensation the loan officer is making. If a loan officer wants to make more money,
they simply sell their clients a higher interest rate. When this happens, the client pays more than they need to. Clearly, a real estate agent who wants the best for their clients would not want to add this additional financial burden to people they care about.

For example, a client recently called into City Creek Mortgage to compare the loan offer they received from their real estate agent’s preferred lender. The client was looking to borrow $350,000. When I shared with the client that there was enough income in the rate they were being quoted to purchase a brand-new Toyota Corolla, they were upset. Generally, we can save most clients between 20-50%. In this case, it was much more.

Lenders Who Serve The Agents
Most mortgage lenders market their services to real estate agents under the premise that they will help them grow their businesses. A business model that is designed to provide the benefit to the real estate agent generally comes as a cost to the homebuyer. For example, there are some mortgage companies that have several offices in a community just to provide the convenience to their real estate partners. Clearly, the agent’s convenience provides no value to the homebuyer. However, the homebuyer is the one paying the price each month in the form of a higher mortgage payment.

A Consumer-Focused Model
I believe the right business model for a mortgage company is designed with the homebuyers’ best interests in mind. At City Creek Mortgage our promises and guarantees are to our clients, not to real estate agents. We are a low-cost provider that is designed to keep more money in the pockets of hard working Utah families. For 20 years, this has kept our clients coming back and referring their family and friends to us for their mortgage needs.

If you need help evaluating the price offering of another lender, we can help you. We can estimate the amount of commission income priced into the loan and compare that
to what is priced into a loan offering with City Creek Mortgage. We do what is best for the homebuyer, with the long-term goal of squeezing out the margins in a mortgage industry and eliminate the over-compensated loan officer. As a result, we are the most feared second option by our competitors.

Help us get the word out. When you hear that your family and friends need a mortgage, have them call us. By simply having salaried loan officers and a commitment to make less off each loan, we save people a lot of money. We are Utah’s best mortgage choice and appreciate your continued support.

When you receive a mortgage loan from a reputable mortgage company like City Creek Mortgage, an important part of the process will be underwriting. During this process, the underwriter might ask for what’s called a letter of explanation, or LOE.

Some potential borrowers panic when they get this sort of request, but you should not do so. An LOE is not necessarily a bad thing, and is often quite the opposite – it’s often clarification for a very good outcome. Here are all the basics you need to know.

Why Lenders Ask for Them

Simply put, letters of explanation are asked for so that lenders can receive clarification on a particular financial area. This is usually related to credit and underwriting requirements, which are imposed by government organizations and require a mortgage company to be very diligent with their criteria.

As an example, you might be asked for a letter of explanation regarding a negative entry on your credit report. This requirement might come from the lender, or it could come straight from underwriting guidelines imposed by the FHA or Freddie Mac.

Common LEO Situations

There are a few common situations that might result in you being asked for a letter of explanation:

  • Large withdrawals or deposits from a bank account, especially if a source or good reason cannot be easily determined.
  • High levels of debt in relation to your income.
  • Negative entries on a credit report, including delinquencies, foreclosures, missed payments and more.
  • A banking fee that suggests you may have had issues managing your finances in the past – an overdraft fee is a simple example here.


Letters of explanation are all about simplicity and clarity. Explain what happened, why it happened, and provide any details of the situation. Be succinct without leaving anything out, and enclose all possible documentation that might be needed to help clarify the issue. Be as specific as possible, including dates and dollar amounts.

For more on letters of explanation, or to find out about any of our services, speak to the pros at City Creek Mortgage today.