Mortgage Mistakes

When structured properly, a home mortgage can be a tool to help you build net worth. However, when not properly managed, a mortgage can cause excess burden and be a financial and emotional drain. In the current environment of distressed home values and inevitable interest rate increases, now is the time to ensure that you have a mortgage strategy that is in line with your long-term goals. When advising my clients on their next mortgage, we consider much more than just their loan.

Secondary Home
I ensure they avoid making the following 5 most costly mortgage mistakes:

  1. Listing your home without first being approved for your next home purchase.
    I often hear of horror stories where a homeowner sells their current home and later realizes that they are not in position to financially qualify for their next home. As a result, they are forced to either rent or purchase a house that is less than they had hoped for.
  2. Borrowing more than you can afford or accepting a short amortization with a payment that is not sustainable within your budget.
    Many homeowners have unmanageable mortgage payments. The inevitable result of an over-extended budget is an eventual inability to keep up with the required obligation. Emotions play a large role in how much home to buy, and when to have the mortgage paid off. Making wise and well thought-out mortgage decisions is crucial for long-term mental and financial health.
  3. Not addressing credit challenges in time to help improve your score.
    The interest rate you will qualify for is dependent upon your credit score, more so in today’s market than ever before. Having a credit review in time to correct errors can save you thousands of dollars in interest over the life of a mortgage.
  4. Putting down your entire savings and not maintaining an adequate cash reserve.
    Maintaining a cash reserve is the most important step in achieving financial peace. Without a cash reserve, families live paycheck to paycheck and in a constant state of stress. By not putting down every dollar you have, you can prevent the anxiety of day to day cash flow challenges.
  5. Not considering consumer debts or other investment opportunities when determining how much to put down on your home.
    Managing daily cash flow and minimizing interest expenses is an important consideration for longterm net worth growth. Sometimes, getting on the right path requires a one-time decision to clean up consumer debts to free up cash flow to help increase long term investment opportunities.

By avoiding these common mistakes you can help ensure you are making wise decisions regarding your mortgage that will be most beneficial to you in the long term. Please contact me to discuss how these and other potential pitfalls can be avoided. By having these discussions early in your home buying process, you will be better prepared when the time comes to close on your next home.

 

 

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You want to get the best mortgage rate when you’re shopping around for your new home, and there are a bunch of different factors at play here. One of the biggest, no matter who you are or what the details of your situation may be? Credit score.

At City Creek Mortgage, our mortgage loan programs are available for people all over the credit score spectrum. Your options grow exponentially the higher your score is, though, and people with very low scores may be extremely limited in the loans they can be approved for. With that in mind, here are a few tips to help you keep that credit score up and your options open.

The 20-10 Rule

Many people ruin their credit score through a basic mishandling of daily spending, and the 20-10 rule is perfect if you’re among this group. It’s a simple goal: Never let your credit debt get higher than 20 percent of your yearly post-tax income, and never siphon more than 10 percent of your monthly income to pay credit debts. If you can’t stick within these themes, there’s a good chance you need to re-evaluate your overall finances. If you can, try to be even more strict – the better you do, the higher your score might be.

Easy Debt

Credit score is raised most easily by successfully paying down some active debt, so a great way to get it a quick boost, if you have the funds, is to take on a small bit of “easy” debt which you know you can repay in short order. This could be for a single moderate purchase, or even for things like groceries over a span of a few weeks or months. As long as you’re 100 percent sure you can make payments on time, or even ahead of schedule, this is a low-risk way of raising your score.

Emergency Backup

Always keep funds in reserve for emergencies. It’s not desirable whatsoever to get stuck in a situation where you’re using credit for a big chunk payment you weren’t expecting, and this can torpedo your credit rating. Try to keep at least 15 percent of your available credit open, if not more, and try to keep separate emergency funds on hand.

Organization

Most of all, stay organized. Missed payments are one of the quickest ways to put a dent in your score – there are plenty of easy ways to schedule payments in advance to keep this from happening. Also stay aware of your line of credit and your spending limits, as going over these could also really damage your score.

Want to learn more about credit sore, or any of the other vital factors in your mortgage application? Speak to an expert broker at City Creek Mortgage today.

There are so many details involved in the process of securing a mortgage, and this is what a mortgage company like City Creek Mortgage is here for. We can help you with everything from mortgage rates to determining the best type of loan for you and your family.

As our expert brokers will tell you, knowing the pitfalls to avoid is just as important as knowing the right buttons to push during this process. What are some of the mistakes to avoid during the mortgage process?

Hidden Costs

A big mistake many people make is failing to account for the additional costs that will come with home ownership. They’ll budget for their mortgage payments, but won’t leave any left for maintenance and other expected yearly costs.

In general, it’s recommended that you lay out 1 to 2 percent of your budget for expected maintenance. If you get lucky and you never need this one year, that’ just a boon to your end-of-year finances. If you do end up needing it, that’s a worthwhile precaution you took. Also keep in mind property taxes and any special insurance you may need to purchase.

Ignoring APR

There are lenders who will show you a flashy interest rate figure, but then crush you with huge hidden fees. For this reason, you need to be sure you’re looking at APR costs – these include lender and any other fees, so you’ll see the final, out-the-door price of your mortgage.

No Money Down

It’s typical for lenders to require a 20 percent down payment for most mortgages, and the alternative can be very damaging financially: Mortgage insurance. Mortgage insurance is to protect the lender in case you default on the loan, but you’re the one who has to pay for it if you can’t meet a certain down payment threshold. This can add significant amounts to your monthly payments.

Too Large a Commitment

It’s tempting to make a big investment in a mortgage, which is often your life’s largest expense. This is a legitimate aspiration, but be sure not to take it too far. Spending too much on a mortgage can take away from other vital areas like a car, retirement planning or college education for the kids.

The general rule is this: Don’t spent more than 28 percent of your yearly pretax income on your living situation, including your mortgage. If your costs will well exceed this number, consider whether a smaller mortgage might be the better route.

Credit Issues

Credit score goes a long way to determining the types of loans and interest rates you’ll be approved for, and it’s a mistake to go searching for a mortgage without proper credit management already in place. Try to check at least six months in advance, so you’ll have time to move some things financially and raise the credit score if it’s too low.

Our brokers at City Creek Mortgage are here to answer any further questions you have on this or any part of our mortgage services.

When you are in the process of buying a home you need to be aware of real estate scams. Although they may sound genuine these scams are designed to take advantage of new homebuyers or those who haven’t done their research.

Keep in mind that if it sounds too good to be true then it probably is. With some preparation and research you can evade scams when buying a home.

Requests to Wire Funds

If it is ever requested that you wire funds to the seller or real estate agent you are working with, you should start looking for another home somewhere else.

Never wire money or give out your financial information to anyone that you do not know. If they are giving you excuses to why they are using this process, it is more than likely a scam.

Claim to be from a Government Housing Program

A lot of scams out there will claim to be from of associated with a government housing agency. They will even have websites that seem legitimate and will ask you to pay a fee for their services.

Government agencies will never ask you to wire them money. If you are not sure if the agency or offer is real call the agency and get their story.

Are They Legitimate?

There have been times when people will pose as a real estate agent or the owner selling homes that do not belong to them. Actually there have been a lot of previous real estate agents still selling homes illegally!

The best way to avoid this is to work with someone who was referred to you by a friend or family member. Either way you should always research the sell or agent before working with them.

Appraisal Seems High

Appraisal fraud is another scam you could come across. The seller will state that the property is worth more than it really is.

You should always check the date on the appraisal and ever get your own appraisal of the home done. Additionally, you should check the value of other homes close by to get an idea of what the home may be worth.

Before and during the loan process many people make mistakes that may cost them their approval and the home of their dreams.

To avoid this potential disappointment always follow these guidelines…

  • Don’t change your job
  • Don’t quit your job
  • Don’t become self-employed
  • Don’t move your bank accounts.
  • Don’t buy anything you have to finance (cars, trucks, furniture, etc).
  • Don’t buy furniture on credit.
  • Don’t open any new consumer credit accounts.
  • Don’t be late on any of your credit liabilities or charge excessively.
  • Don’t make large deposits into your bank accounts that you don’t want to explain or document.
  • Don’t co-sign on a loan for anyone.
  • Don’t fail to disclose any debts, obligations, or pertinent information.
  • Don’t spend savings budgeted for your down payment or cash needed at closing.
  • Don’t forget to disclose child support or alimony.

 

Remember, your loan is not final until it has FUNDED & RECORDED.

To be safe follow all of these rules until after that point to ensure you get the home of your dreams!

If you have any questions about how to avoid these pitfalls, please don’t hesitate to give me a call at
801-501-7950 or email me at mike@citycreekmortgage.com.

One of the biggest mistakes homeowners make is continually adding to their principal balance by accruing loan fees to refinance every time an opportunity arises to lower their interest rate. With the average homeowner refinancing every three to five years, and with record low rates lately, even more frequently, it’s no wonder mortgage balances are not reducing. Before they recoup the closing costs of their last mortgage, they refinance again, resulting in an ever-increasing loan balance.

The solution to this dilemma is a no-cost loan. This is a loan that will have a slightly higher interest rate than a loan that has fees, but all of the closing costs incurred are paid by the mortgage lender, not the homeowner. That way, the principal balance of the new loan can start out the same as the principal balance of the loan being paid off. There is not any equity loss, allowing the homeowner to maintain their strategy of paying down their mortgage, while still taking advantage of great interest rates and enjoying a lower mortgage payment.

When comparing a mortgage option that has closing costs vs. a no-cost loan, the full cost loan will often have a higher mortgage balance to cover the closing costs incurred. If you take a higher loan amount at a lower interest rate, and compare that with a lower loan amount at a higher interest rate, the results can be astonishing. In addition, because the no-cost option has a higher interest rate, a greater portion of the payment will be tax deductible. On an after-tax basis, the breakeven point is typically much more than TEN years before the homeowner will have benefited by paying closing costs to obtain a lower rate.

As a Certified Mortgage Advisor, my role is to analyze each of my client’s goals and objectives, and make recommendations as to the best solution for their situation. In most cases, I suggest the no-cost option. We have a program that compares and contrasts different levels of closing costs vs. interest rate, and projects a breakeven point for each option. No-cost loans are available for home purchase loans as well as refinances. There are restrictions to no-cost loans; however, most homeowner’s loans will qualify (subject to credit, income and appraisal qualifications).

If you are wondering what interest rate and closing costs options are available for you, use our Find Your Best Rate Tool. There will be a series of questions to answer and you can view the different interest rate and closing cost options. Any interest rates that show the closing costs to be $0 or less are essentially no-cost loans. Also, be sure to check out the video where I explain the benefits of a no-cost loan as well as the written case study.
If you would like to discuss your options, call my office at 801-501-74950 and request a free mortgage review. I will review your overall mortgage, debt, and equity situation, and tell you if a change can and should be made. As a trusted advisor to hundreds of families, you can be certain you will receive honest and professional advice.

Markets opened to a weaker than expected Durable Goods report that was already forecasted as a low target.  -7.3% was the reading, dropping below the -5.0% expected.  This adds weight to the other recent disappointing reports of last week, like higher Initial Jobless Claims and weaker New Home Sales.  It also keeps investors in the dark regarding the Fed’s approach to tapering.  The remainder of the week is busy with economic reports such as Pending Home Sales, Consumer Confidence, GDP, and PCE.  Mortgage bonds are up on today’s news and are attempting to maintain their  turn around momentum since hitting multi-year lows just last week.  That move in bonds pushed interest rates to their highest in over 2 years, but rates have since moved lower with the possibility of tapering being pushed out further.  With the current momentum in our favor we will maintain a floating bias.

When structured properly, a home mortgage can be a tool to help you build net worth. However, when not properly managed, a mortgage can cause excess burden and be a financial and emotional drain. In the current environment of distressed home values and inevitable interest rate increases, now is the time to ensure your mortgage is properly structured and in line with your long-term goals.

Over the years I have witnessed many homeowners make significant mistakes in how they obtain a mortgage, as well as the way their loan is structured. Below is a list of the top 5 mistakes I continually see homeowners make:

1. Paying closing costs to Refinance their home loan each time interest rates drop. Many homeowners haveRefinanced their mortgage three or more times since mortgage rates began their historic drop in November of 2008. For those who paid several thousand dollars each time, their balance now is significantly higher than it was before the initial refinance. If a no-cost loan is available, I strongly suggest this option. That way, you are able to take advantage of a declining interest rate environment without increasing your mortgage balance. Feel free to call my office for a free analysis and explanation.

2. Borrowing more than they can afford or reducing the term of the loan resulting in a mortgage payment that is not sustainable within their budget. Many homeowners have unmanageable mortgage payments. The inevitable result of an over-extended budget is an eventual inability to keep up with the required obligation. Emotions play a large role in how much home to buy, and when to have the mortgage paid off. Making wise and well thought-out mortgagedecisions is crucial for long-term mental and financial health.

3. Using their home as a piggy bank. Home equity should be used as a tool to increase net worth, not to purchase luxury items or repeatedly consolidate consumer debts. Strategic debt consolidation can make sense; however, repeatedly using the home to bridge a shortfall in the budget is not a healthy use of home equity.

4. Not seeking advice from a Professional mortgage Advisor. Many banks and internet mortgage companies hire order takers to walk you through the mortgage process. A Professional mortgage Advisor does not cost any more than an order taker and will provide insight and mortgage management that is not offered by transactional institutions. Remember, a mortgage is a tool that will either help increase your net worth, or it will deplete it. Ensure it is properly structured and managed.

5. Shopping for the lowest interest rate. Many people do not realize that mortgage rates are continually changing, minute by minute. In the time it takes to shop interest rates, the rates provided by prior lenders may no longer be available. If you work with a reputable mortgage Advisor that you trust and who has a system for monitoring the markets to know when to lock in your rate, chances are you will receive the great rate you are looking for.

By avoiding these common mistakes you can help ensure you are making wise decisions regarding your mortgagethat will be most beneficial to you in the long term. Also, remember to share your goals and long term objectives with the mortgage Advisor you work with so that he/she can assist you in achieving them. For a free mortgage review, call my office at 801-501-7950 or e-mail me at mike@dev.citycreekmortgage.com.

Don’t Cannibalize your equity by paying closing costs. One of the biggest mistakes homeowners make is continually adding to their principal balance by accruing loan fees to Refinance every time an opportunity arises to lower their interest rate. With the average homeowner refiancing every three to five years, it’s no wonder mortgage balances are not reducing. Before they recoup the closing costs of their last mortgage, they Refinance again, resulting in an ever-increasing loan balance.

The solution to this dilemma is a no-cost loan. This is a loan that will have a slightly higher interest rate than a loan that has fees, but all of the closing costs incurred are paid by us, not the homewoner. That way, the principal balance of the new loan can start out the same as the principal balance of the loan being paid off. There is not any equity lost, allowing the homeowner to maintain their strategy of paying down their mortgage, while still enjoying a lowermortgage payment.

When comparing a mortgage option that has closing costs vs. a no-cost loan, the loan option with closing costs will have a higher mortgage balance to cover the closing costs incurred. If you take a higher loan amount at a lower interst rate, and compare that with a lower loan amount at a higher interest rate, the results can be astonishing. Because the no-cost option has a higher interest rate, a great portion of the payment will be tax deductable. on an after-tax basis, the breakeven point is typically much more than TEN years before the homeowner will have benefited by paying closing cost to obtain a lower rate.

As a Certified mortgage Advisor, my role is to analyze each of my client’s goals and objectives, and make recommendations as to the best solution for their situation. In most cases, I suggest the no-cost option. We have a program that compares and contrast different levels of closing costs vs. interest rate, and projects a breakeven point for each option. No-cost loans are available for home purchase loans as well as refinances. There are restrictions to no-cost loans; however, most homeowner’s loans will qualify (subject to credit, income and appraisal qualification).

To see if you would benefit from a no-cost loan, call and arrange a 15 minute mortgage review. I will review your overall mortgage, debt and equity situation, and tell you if a change can and should be made. As a trusted advisor to hundreds of families, you can be certain you will receive honest and professional advice. You can reach me by calling 810-501-7950, or by email at mike@dev.citycreekmortgage.com.