Mortgage Strategies

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.

With home prices moving a great deal higher in recent years, some are worried that we are now on the verge of another housing bubble. Although this could be true, it certainly doesn’t appear likely in the near term. In fact, housing prices are projected to continue to grow over the coming years. However, many millennials are using this fear as rationale to continue to live with their parents or rent.

Real estate used as a primary residence has proven over time to be a wise investment, regardless of the timing of the purchase. Although some built up significant equity by purchasing when prices were at their lows during the recent housing crisis, even those who bought at the peak of the market in 2007 should once again be in a strong position of equity.

Homeownership is one of the greatest determining factors that contribute to wealth accumulation. In 2015, the average net worth of a homeowner was $195,400, compared to just $5,400 for a renter. Not only is a homeowner able to better weather a financial storm by borrowing against accumulated equity, homeowners are also able to reach a point where they no longer must make a mortgage payment once the home is paid off. Further, with rents rising as rapidly as they have in recent years, a homeowner who purchased their home years ago is likely paying far less than a renter who is leasing a similar priced home. In addition, the homeowner will receive a tax break that isn’t available to those who rent.

Although inching higher, the current home-ownership rate is well below where it should be. We need to see a bigger push for millennial home buyers to help ensure a strong economy in the decades to come. If they fail to buy at a reasonable age, they could be missing out on a significant opportunity.

Throughout the mortgage world, many lenders are wary of potential clients shopping their mortgage rates around to other potential lenders. They don’t want clients to potentially see better deals or rates elsewhere.

At City Creek Mortgage, we’re the opposite – we’re so confident in our programs, and maintain such a desire to see our clients succeed, that we encourage customers to shop around at other lenders. There are several negative outcomes that can take place if you never shop around while searching for a mortgage loan – here are a few of the most common.

Bad Lender

If you only work with a single lender and they lack in any major area, you could be in trouble. Some might only offer limited loan packages or lots of sneaky teaser rates, and even worse in many cases, bad lenders will be unable to properly explain certain elements of the process. A lender doing a bad job explaining something like an adjustable-rate loan could lead to enormous financial issues for you if you take the wrong loan.

No Comparison Points

Using only a single lender prevents you from having any comparison points for the market. Different lenders have all sorts of different fees – origination, title insurance, application, mortgage broker, rate lock and others. These can vary wildly between lenders, but if you don’t shop around, you’ll have no way of knowing if your lender is charging very different fees than others.

Missing Out On Special Deals

Lenders want your business, and to get your attention, they’ll roll out deals. Lenders might fold closing costs into a mortgage even though they don’t have that listed option, or might be willing to negotiate these kinds of items. But again, if you only stick with one, there’s no point leverage.

Less Bargaining Power

Down these same lines, failing to shop around completely destroys your bargaining power. A lender who knows you have no other options has no reason to budge on any points of contention, and no reason to give you a better deal.

Want to learn more about the mortgage loan process, or any of our services? Speak to the brokers at City Creek Mortgage today.

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.


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.

A school districts location has a substantial effect on the property value of homes nearby. A school district with a good reputation will attract families that have school-aged children. Thus, creating a demand for real estate nearby, this demand can make property values go up.

Homeowners Wealth

The school district itself is not necessarily directly responsible for the rise in property value. More often good schools will be located in neighborhoods that are well-off and have a higher standard of living.

The affluence in such neighborhoods has a tendency to help create school districts that have high test scores and higher student performance than those located in poorer areas.

Therefore when real estate is located near a good school district, the property value will tend to be higher than surrounding areas.

Higher Demand

A good school can bring stability to the community, so when buying a home there is a high demand for a good school close by. With this demand and a limited product such as real estate the property values are higher.

Houses that are located in a highly pursued school district will often sell for higher prices than a similar home in a not so popular school district.

More often buyers will be willing to pay more than their budget and even give up certain amenities in order to get a home in their desired school district.

Better Resale Value

The school district is an important aspect to consider when you are buying a home even if you don’t have children. It could have an intense effect on the resale value of your property.

A property that is positioned in a good school district will be more likely to hold its value or even increase in value when the rest of the market may have slowed down.

A lot of home buyers are prepared to pay more for good schools and are willing to trade a larger home for a smaller one just to be in a better school system.

Whether buying or selling a home in a good school district you can expect that the price will be higher than a less desired school district.

A mortgage payment is similar to a rent payment, but there are differences. Both represent the amount you pay for your housing needs and are a significant part of your monthly budget. A mortgage is preferable in that it finances an important asset, but you need to plan ahead for the additional costs that come along with it.

Homeowners and Taxes

You must pay your annual property taxes. Rates fluctuate widely across the country, but the national average is 1.29% of the value of the home.

Association Fees

You will almost certainly be required to pay for some kind of home owner’s associate fee. These associations are important and to protect your property values, but there is a cost for their services. This expense depends on the scope of the associations’ influence.

Higher Utility Bills

Your living space in an apartment is well insulated and relatively small. A home that stands on its own is a different matter. Many underestimate the cost of additional utilities expenses. Higher electrical bills to heat or cool your home can sneak up on you.

Maintenance and Repairs

When you were renting, you only had to pick up the phone and make a call to get something fixed. Now you are responsible for repairs and maintenance. As a general rule, you should budget about 2% of your home’s value every year for this expense.


You must carry protection against losses. Your mortgage lender will want the collateral on the loan secured. Average annual costs for homeowner insurances is between $300 and $1000. If you have put less than 20% down on your home, you will be expected to carry an additional property mortgage insurance policy. This can cost you as much 1% of the total of your loan annually.

It can seem overwhelming, and all of these costs add up. Fortunately, your mortgage broker is ready to help you decide on budget for a home that you can safely afford.

Overextending your budget is a mistake new homeowners often make. While your mortgage broker helps you to secure a source of lending, you worked hard to save for the down payment. What many do not realize is that you still need to keep saving money even after you have finalized the purchase.

Keep Building Your Savings

Buying a home with the maximum payment you can afford makes it difficult to keep your expenses under control. One of the best ways to guard against this pitfall is to over budget for your personal savings instead. Commit to setting aside money for yourself during the home buying process. It keeps you grounded in reality and gives you a funds to fall back on if things go wrong.

Repairs Are Always Unexpected

You are going to have to fix things that break, and you will have to pay for those repairs. As a renter, your cost to maintain your living structure was all included in the monthly rent. The landlord budgeted for repairs and paid for them as a business expenses. Many new homeowners overlook this cost and fail to realize that their homes will not stay in good shape without work. As a general rule, budget about two percent of your home’s value for annual repair costs.

It Takes Money to Have Some Fun

You are going to want to have some fun too. Over extending your budget puts you into an uncomfortable situation where your entire working life is spent trying to earn enough to keep your home. This leads to burnout. Resentment that can creep in and start to affect your personal relationships. Budget enough cash to stay happy and active.

Your home is a major investment. You want to have a secure financial structure that will ensure that your purchase stays profitable for you in all aspects. If you have gotten yourself into trouble with a payment that is barely affordable, your mortgage broker may be able help you to refinance.

One of the concerns we have when our clients are refinancing their home mortgage is that they may be extending the term of their mortgage.

For example, if you did a 30 year mortgage four years ago, you now have only 26 years left on your mortgage. ᅠIf you are considering a new 30 year mortgage, you are now adding another four years to the term of your loan.

Our ultimate goal is to get you in a position where you no longer need a mortgage. ᅠIn many cases, the fastest route to get people there is to increase the term of their loan to put them in a better position in other areas of their financial picture. ᅠHowever, if you are in a position to maintain or shorten the term of your loan, there are several options:ᅠ

1. Choose a shorter term mortgage

2. We can customize a term with our “Your Term Mortgage” Loan. ᅠFor example, if you have 26.5 years remaining, we can set the loan for a 26 or 27 year amortization schedule. ᅠThere may be an increase in fee or interest rate for this, but it will keep you on or near the current term of your loan.

3. We can tell you the monthly payment to make on your new 30 year mortgage to keep you on the exact same amortization schedule. ᅠThis will require discipline on your side to make a higher than minimum payment due each month. ᅠHowever, it can put you on the precise amortization schedule as you are now on.

4. If you situation allows, we can set your new mortgage balance for the same amount you borrowed when you took out your current loan and use the extra to make a principal curtailment payment. ᅠThe principal balance reduction will force down the amortization schedule to match your current amortization schedule.

Our goal is to help you think of any potential downside to refinancing your home. We are available to discuss any thoughts or concerns you may have. As your advocates, we are here to help you make wise financial decisions.