Mortgage Tips

When it comes to getting a mortgage, particularly among first-time buyers, the down payment is often a huge area of concern. Popular perception of the down payment, which is paid up front at closing as part of a mortgage loan, has built it up to be one of the most significant financial hurdles for buyers to clear during this process.

At City Creek Mortgage, we’re here to make the down payment simpler and less imposing. Let’s go over some of the basics on average down payment sizes – chances are, these vary pretty wildly from what you may have heard are the “requirements” for down payments to obtain a new home.

Average Payment Sizes

Within the mortgage world, there’s a common misconception that to get a new home, you absolutely must have 20 percent of the total home cost saved up in advance for a down payment. This is often bandied around as the threshold at which a lender will not require you to pay additional monthly private mortgage insurance to help cover them in case of a default on the loan.

That’s simplifying things a bit too much, however – many buyers don’t pay anything close to 20 percent down. There are several loan programs that offer assistance with down payments, or even programs that require no down payment whatsoever. According to the National Association of Realtors, the median down payment for first-time buyers over the last few years has been 6 percent. That’s despite nearly 90 percent of buyers believing they had to have at least 10 percent down to qualify.

Calculating Down Payments

Calculating a down payment based on a percentage is about as simple as it comes. The down payment is tied directly to the purchase price of the home, meaning all you need is some basic multiplication – a home worth $200,000 and an expected down payment percentage of 10 percent would lead to a down payment number of $20,000.

For more on average down payments and what you need to save in advance of a home loan, or to learn about any of our mortgage solutions, speak to the pros at City Creek Mortgage today.

At City Creek Mortgage, we’re here to be more than just mortgage pros. Our experts are indeed experienced and well-trained in every area of helping you get the best mortgage rates, but they’re also here to help you with several parts of the actual homebuying process.

Especially for first-time buyers, there can be a few unexpected costs that arise during the purchasing process – often due to red flags a more experienced eye might have caught in advance. Here are some of these red flags to keep an eye out for, either during the home inspection or simply throughout the process.

Pests or Insects

Pests may seem like just a nuisance to some, but they can also be a sign that the home has already undergone structural damage. Many pests, such as termites, can cause huge amounts of damage to a home in a fairly short period of time – if you see signs of these around, how do you know the foundation of the home isn’t already in bad shape?

Foundational Issues or Major Repair Problems

Down similar lines, check the entire foundation during your inspection. The primary issue to look out for is cracking, particularly any larger cracks that may cost thousands to repair. The basement is the best starting point here.

Nasty Odors

You want to be on the lookout for abnormal smells – both of the positive and negative variety. There’s obviously a problem if the entire home smells like raw sewage, but some sellers will look to cover up a major odor issue with air fresheners or other compensation. Be on the lookout for over-the-top use of these kinds of products or any other signs of covering a major odor issue.

Fresh Paint

It’s normal for many sellers to include a fresh coat of paint throughout the home as part of the sale process – this isn’t anything to worry about. On the other hand, if you notice patches of paint in certain individual areas either inside or outside the home, this could be a sign of a repair that went wrong that the seller is trying to cover up. If you notice any inconsistency here, make sure it’s inquired about.

Mold

Not only can mold signal a leak or other moisture issue in the home, it’s a health risk to humans. Removing mold can be costly and a lengthier process than you might think, so if you see even token signs of it, be thorough in your investigation.

To learn more about telltale red flags at a property, or for information on any of our mortgage or refinance programs, speak to the staff at City Creek Mortgage today.

Keeping Up With the Competitive Spring Market

The spring is one of the busiest times in the mortgage world, and with good reason. April and May are the two single largest months for home listings hitting the market across the country, meaning there are often plenty of choices available to you.

It also means, however, that there’s more competition around this time of year. At City Creek Mortgage, we can help you get the best mortgage rate and be a competitive buyer on the market despite this increase in competition. Here are a few tips we offer.

Advanced Planning

For starters, think about what’s important to you and your family in a home. Think about neighborhood considerations, space, and any other top desires you have. At the same time, avoid being too particular, as this could narrow down your choices too much.

Pre-Approval

Down similar planning lines, always look to loan pre-approval to speed up your process. Pre-approval is a process where you submit important financial information in advance, then get an objective idea of the sort of financing you qualify for. Get all your paperwork together and talk to our pros about getting pre-approved.

Open Houses and Other In-Person Areas

Open houses will be a vital part of a competitive market – the faster you can identify the proper traits in homes, eliminating those you aren’t interested in and honing in on the best ones, the better. Wear comfortable clothing in case you’re gone a while, and bring a detailed list of questions that aren’t on the home listing.

In addition, spend time talking to neighbors while you’re at the open house if possible. Try to find out more about the neighborhood. You should also take a drive through the neighborhood at various times of day to make sure you’re comfortable with traffic patterns, school times, and other important areas.

Flexible and Available

During competitive market periods, you need to be flexible and available as a buyer. Set aside time to look for homes whenever possible, but be ready to head out on short notice if property that meets your needs becomes available.

Making a Great Offer

Finally, making a great purchase offer that stands out from the competition will often get you over the top. Ask our pros about some tips for making compelling offers that sellers will fall in love with.

For more on distinguishing yourself as a buyer in a competitive market, or to learn about any of our other 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.

Basics

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.

Requirements

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 median 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.

At City Creek Mortgage, it’s our mission to get you the best mortgage rate as you search for your home. Especially for first-time buyers looking to become homeowners, this is a vital consideration.

Why should you want to become a homeowner? There are numerous benefits, from the independence and space you’ll find to the kinds of areas you might be able to live in. But perhaps the biggest benefit and one many folk often overlook or become confused on, is the financial side – two recent studies helped illustrate the net worth and ROI gap between homeowners and renters. Let’s look at the results, and what they might mean for you.

The Stats

As of December 2013, the US Census Bureau reports the median net worth of homeowners at $199,557. This is in comparison to the net worth of renting households, which is just $2,208 on average, or nearly 100 times less. In addition, the recovery of the economy during the years in between makes it likely that the gap is even larger today.

Another study from the Federal Reserve effectively confirmed these findings, noting that the gap in homeowner and renter net wealth rose from a difference of $182,000 to over $220,000 during the period between 2010 and 2013.

How to Interpret Them

It’s important to remember that in many situations, this disparity was due to more than just a housing situation. Many homeowners are in that situation because they’re more well-off to begin with, allowing them to invest in a home.

However, this is something of a self-fulfilling prophecy in some ways. Homeowners enter into debt just like renters, but they do so in an investment – renters do not. Since home prices continue to rise faster than interest on a basic home loan, homeowners are building equity over time and can often make a significant profit on the back end. This is without even considering all the tax advantages that come into play, none of which are available to renters.

To learn more about why you should favor homeownership over renting if you have the choice or to learn about any of our other mortgage loan services, speak to the pros at City Creek Mortgage today.

The year 2018 is here, and now that we’re all done celebrating the turn of the calendar, it’s time to get down to business. A new calendar year is a good time for those in the mortgage loan world to take a look at some of the trends that took place over the last year and to forecast how these might carry over into the following year.

At City Creek Mortgage, our experts are ahead of the curve here. Let’s look at a few expected trends for 2018 based on expert opinions in the field.

Rising Home Sales

In recent years, homes have become tougher to find. But 2018 could signal the reversal of that trend, with a growth in inventory anticipated around the fall period. With this, resales of existing homes should rise to a small degree. Experts forecast the southern part of the country to have the most growth, with up to 6 percent growth in some markets.

Rising Mortgage Rates

Mortgage rates were at 4.07 percent in 2017, and they could rise as high as 4.7 percent in 2018 if projections hold. Do remember, though, that mortgage rate is one of the toughest areas to predict – many experts predicted the same kind of rise in 2017, and that never ended up happening. So while a rise of this magnitude is possible, it’s no certainty.

Lowering Home Prices

After several years of insane appreciation, home price increases are expected to slow in 2018. Growth is expected at just 4 percent, in comparison to over 6 percent in each of the last two years. Experts expect home construction to rise significantly, with single-family housing expected to jump by 8 percent.

Equity and Lines of Credit Increasing

Homeowners gain equity as home values rise, and lenders and banks are expecting more borrowing against equity to take place in 2018. Roughly 1.6 million homeowners will receive new home equity lines of credit this year, a 16 percent increase from 2017. By 2022, over 10 million homeowners could have these lines of credit – double the number of the previous five-year segment.

To learn more about changing mortgage trends in 2018 or any of our other services, speak to the pros at City Creek Mortgage today.

At City Creek Mortgage, we’re here to tell you that the actual securing of a mortgage loan is only half of the home buying process. We’re also here to help with the other half: Securing a great home based on the financial elements involved in your situation.

For some home buyers, this is the tougher end of things. Some find that they keep coming up short in what remains a seller’s market – they just keep losing out to better-qualified buyers or people with stronger offers. Luckily, there are tactics you can take to help improve your position here. Let’s look at a few.

Move Fast

Given that it’s a seller’s market, you need to be prepared to move quickly when you see a home you like. Hemming and hawing is a quick way to find yourself undercut by another buyer – the quicker you can go from escrow to closing out a deal, the better. If you’re able to pay cash rather than escrow, this will improve your situation even more. Now, be careful not to rush the escrow or mortgage process – now allowing the proper time to close can blow up the transaction.

Prep For Counters

Know that if you receive a counter-offer from a seller, this isn’t meant in an insulting way. It’s likely because the seller has multiple offers, and is looking to get the best deal.

However, be aware that the best deal doesn’t always simply mean the most money. Some sellers might be in escrow and have other concerns, or might accept a lower offer from a better-qualified or more prepared buyer. Many sellers aren’t in a position to risk their position on an iffy buyer, and will attach a lot of importance to buyer quality. This is where having an experienced team behind you can go a long way – it shows you’re prepared and well-informed.

Real Pre-Approval

One big part of becoming a better buyer is undergoing real pre-approval, including significant documentation and background checks. This step will tell you what you can afford, and will make your offer appear stronger in this market. A strong, human-underwritten mortgage commitment will help you win purchase offers over comparable applicants.

For more information on improving your buying position, or for any of our other mortgage services, speak to the brokers at City Creek Mortgage today.

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.

In any mortgage situation, equity is a very important consideration. Equity refers to the difference between the current value of your home and the amount you still owe on your mortgage loan – naturally, most people gain equity over time as their balance goes down and the home appreciates in value.

With greater equity comes many more options. Equity is a big factor in any refinance project, and some people use equity as a nest-egg or to help with other financial needs. At City Creek Mortgage, we can help you build your equity to whatever goal you’re working on – here are some tips for raising your home equity.

Shorter Term

Many people who take 30-year loan terms often do so because they simply assume they can’t afford a shorter term, but in many cases, they’re mistaken. These same folks often assume that half the loan term means double the mortgage rate, but this is almost never the case – a 15-year term rarely, if ever, actually doubles payments. Look more closely into a shorter term, and if you can move some things around to make it work, you should consider it to raise your equity more quickly.

Larger Down Payment

With a good credit score, some loans may offer down payments as low as 3.5 percent. But if you’re looking to build equity and you have the funds, consider putting down closer to the traditional 20 percent, or even higher if possible.

Home Improvements

Particularly in places like the kitchen, bathroom, garage (doors), windows and outdoor areas for landscaping, home improvements can add significant equity to a home. Investing $400 or $500 in these kinds of improvements will often yield an equity return four or five times that large.

Pay Larger Principal

If you’re able to manage the funds, paying the principal amount off more quickly is the fastest way to build equity. A single extra payment the size of a standard monthly amount can put you seven or eight years ahead of schedule on a 30-year loan, so strongly consider this if it won’t damage other areas of your finances.

Interested in learning more about building equity, or any of our other mortgage loan solutions? Speak to the brokers at City Creek Mortgage today.

 

Veterans who serve our country deserve to have plenty given back to them for their service, and the mortgage industry helps lead the charge. A VA loan, reserved just for veterans or certain active service members, is a loan program with several highly beneficial elements that can’t be found in most conventional loans.

At City Creek Mortgage, we offer fixed rate VA loans with major refinancing benefits. Let’s find out about these and some of the other primary reasons veterans should take advantage of these loans if they’re able.

Down Payment

In most conventional loans, lenders expect a 20 percent down payment to kick things off. With most VA loans, though, including those from City Creek Mortgage, there is no down payment. This payment is usually to protect the lender from the risk of default, but because the federal government protects VA loans, there’s no need for this kind of speed bump.

Insurance Premiums

Down these same lines, in a traditional loan situation, there are penalties if you’re unable to come up with the 20 percent down payment. This is typically in the form of insurance premiums, which are paid for by the borrower and help give the lender that same level of protection in case of default.

Again, this is unnecessary with a VA loan. The lender is backed by the government, and there’s no risk on their end. This means veterans are spared from potentially expensive monthly insurance premiums, and can build equity or pay down debt more quickly.

Mortgage Rate

Interest rates are a vital part of any mortgage loan, and they’re much lower for VA loans than corresponding loans. They can be up to 1 percent lower in many cases, and the savings to veterans can often hit five figures over the life of the loan.

Spousal Transfer

Veterans take a number of risks to help keep us safe, and because many active service members are also eligible for certain VA loans, spousal transfer is a very important element. This allows a veteran or active service member to pass their benefits on to a spouse if they pass – either in the line of duty or for other reasons later in life. This can be a huge benefit to a surviving spouse who might be in a very tough place.

City Creek Mortgage is your go-to mortgage company for VA loans and all other types of mortgage services in Utah. Speak to one of our brokers today to find out more.