mortgage FAQs Tag

Getting a mortgage can be confusing, especially for first-time homeowners. There’s a lot of rumors around claiming that to get a mortgage you need to have perfect credit and a large sum of cash available for your deposit. These rumors can certainly make applying for a mortgage seem intimidating. But at City Creek Mortgage, we believe that everyone deserves the opportunity to have their own home. We know how scary it can be when looking at the options, but we’re here to help. So if you’re intimidated by a mortgage, here are five reasons you shouldn’t be.

Most Companies Want to Lend You Money

Because a company is loaning you money, it’s easy to think they’re going to want to be stingy and avoid doing so. But the truth is just the opposite. Most lending companies want to loan you money because that’s how they make money. When a potential buyer calls or enters the office, the loaner wants them to become a customer so they can get paid later on.

However, loaning money is still a big risk. This is why there are rumors about perfect credit and 20% down payments. While it’s true that a loan company wants you to be a client, they also have to protect themselves and make sure you’re able to pay them back with interest. They want to work with you, though, so companies will work hard to find a mortgage that fits your needs, even if your credit is less than stellar and you don’t have a lot of money for a down payment. 

You Can Still Get a Mortgage with Gaps in Employment – Ask How at City Creek Mortgage

It’s important to any lender to ensure that the recipient of the money is going to be able to pay them back. Most loan offices will require proof of employment for the last two years or so to do this. However, especially these days, companies understand if there are gaps in employment. 

If you do have gaps in your employment, write a letter of explanation along with your application. As long as the gaps are relatively short and/or with good reason, most companies will still loan you money as long as you are currently employed. Reasonable gaps in employment include (but aren’t limited to) being laid off, being unable to work due to an injury, and taking care of sick family members. 

Proper Documentation Saves a Lot of Time

Mortgage applications are hefty and require a lot of paperwork and verifications. Having all of your documents prepared ahead of time makes the process much simpler. If you have all your documents organized and ready before you begin an application, you’ll wonder why you were so stressed about it in the first place.

When applying for a mortgage, you’ll need the following documents:

– Verification of employment for up to two years

– Tax returns for up to two years

– Pay stubs or other proof of income

– Bank statements and list of assets

– Credit reports

– Photo I.D.

– Renting agreement and proof of payment (if currently renting)

If you have all of this ready to go before you start applying, you’ll not only save yourself time and money, but you’ll also show your lender that you are responsible and organized.

 

City Creek Mortgage

Photo by John Schnobrich on Unsplash

You Are in Charge

Although the lender has the money, it’s important to remember that you are in charge of the process. It’s going to be your mortgage for your home, so it has to be something that works for you. Don’t let a lender pressure you into an agreement that you don’t feel comfortable with. It may seem easier to go along with them out of fear of not getting approved, but they need your business. There are dozens of mortgage lenders in any given area, and they know you can always go somewhere else. The customer is always right, and only you know what’s best for your budget/needs.

There are Several Options to Choose From With City Creek Mortgage

If traditional mortgage options and routes don’t appeal to you, there are several different packages you can choose from. Mortgages are flexible, and you can mix and match almost any length, type, and interest rate percentage. Work with your lender to discover which option is right for you and your home buying needs. 

Buying a home doesn’t have to be intimidating. Applying for a mortgage through City Creek Mortgage means you stay in charge through the whole process and have control over what type of mortgage you need. With our help, you can organize your documents and speed through the process with ease. Then you’ll wonder why you were so worried in the first place. So give us a call at 801-501-7950 to get started.

Buying a home is a major investment. Whether this is your first home purchase or one of many, it’s important to write down any questions you may have for your mortgage lender. The more you know, the better you’ll feel about your purchase. 

Our team at City Creek Mortgage wants you to have all your questions answered so that you’ll feel confident about your purchase and the terms you agree to when you sign your mortgage documents. If you are unsure of where to start, these five questions are a good starting point.

How can City Creek Mortgage help me qualify for a loan?

Several factors go into mortgage qualification. Mortgage lenders will look at your income, property, assets, and your credit report. 

Not only is your credit score important, but your credit history is also a factor. In general, for loan qualification, you should assume a good baseline qualification score for a conventional loan is around 620. 

Credit isn’t the only factor, however. Your debt-to-income (DTI) ratio is an essential indicator of your financial health, too. A good rule of thumb is to keep your DTI no more than about 45%, including your house payment. 

What’s the difference between being prequalified and preapproved?  

Even though some use the terms prequalified and preapproved interchangeably, technically, these terms mean very different things. 

For prequalification, you can assume your lender may or may not pull your credit report to get an idea of the loans you qualify for. If your lender doesn’t pull your credit, you need to be forthcoming about your credit score, credit history, and debt-to-income ratio. With this information, your lender can give you the best guess at what you’re prequalified for. 

In a preapproval, the lender will pull your credit. You’ll also be required to produce financial documents like bank statements, paystubs, W2 forms, and other information so that they know exactly what the top end of your budget can withstand, including an assumed interest rate. Preapprovals are undoubtedly the preferred method of approval. 

How do I know how much I can afford? 

It’s crucial that you understand, from the very beginning of the process, that you don’t want to purchase your way into a financial burden. Even though you’ll receive a top-end estimate of how much you can afford, that does not mean you should spend up to that top amount. 

Think through all your expenses and take a look at your current income. At the end of every month, you still want to have enough money left over that you can save money for emergencies and continue to enjoy hobbies or vacations from time to time. 

You should also keep in mind that purchasing a home is only a first step. Homeownership costs money, too. You’ll have maintenance costs, landscaping fees, and those unexpected repairs that can be costly – like air conditioning units. All of those things need to be considered before you max out your budget. 

At City Creek Mortgage, we often counsel our clients to purchase the home that will make them happy – not full of anxiety and dread after every mortgage payment. No house is worth that! 

How much should I save for a down payment on my home? 

There are different trains of thought regarding down payments. There’s the required down payment for the mortgage for which you qualify, and there’s the best down payment unique to your situation. 

  • If you qualify for a USDA or VA loan, no down payment is required. 
  • Otherwise, if you are getting an FHA loan, the minimum required down payment is 3.5%. 
  • If you’re getting a conventional loan through either Fannie or Freddie Mac, down payments start at 3%. 

Keeping all that in mind, there are lots of reasons why you might consider making a higher down payment than is required. 

If you can put 20% or more down on your home, you can avoid private mortgage insurance (PMI). Otherwise, you’ll be required to make this as part of your payment until your home reaches 20% equity. 

Take into consideration that you may need to make furniture purchases or invest in some upgrades before moving into your new home. So, you may need to have a little extra set aside! 

Our City Creek Mortgage team advises that you should put down as much as you can afford without compromising other financial goals. The more money you can pay upfront, the less you’ll have to finance and pay over time. 

What is included in my mortgage payment?

This will depend on what kind of mortgage you’ve qualified for. If you have a down payment of less than 20%, you’ll likely have an escrow account set up for taxes and insurance. 

At the very least, your mortgage payment will consist of both the principal and the interest on the loan. 

It may be that your mortgage payment includes property taxes, insurance, maybe even homeowners association fees. We recommend you specifically ask this question before you sign your paperwork. Be sure to ask what percentage of your monthly mortgage payment is going toward principal and interest. 

About City Creek Mortgage 

City Creek Mortgage is a different kind of lender. We know your mortgage is important, but we want to be sure you understand the process and are informed about finances in general, too. 

Mortgage lending can feel intimidating and even overwhelming. Our team wants to alleviate all that by making you the primary focus of the process. We listen to your questions and concerns. In addition, we answer your questions and provide you with the best information available based on our professional training and years of experience. 

We are the most trusted, respected, and loved mortgage company in Utah because we put you and your financial health first. Contact us for a FREE Instant Rate Quote today. 

At City Creek Mortgage, we help first-time buyers and those more experienced buyers alike. If this is your first time considering the purchase of a home, you’ve come to the right place to be walked through the process. 

Our professionally trained staff is available to explain, encourage, and empower you throughout the homeownership process. We understand this is an exciting (and nerve-wracking) time, and we want you to feel confident throughout. 

Considering these four tips puts you on solid ground to get started. 

Save for your down payment. 

With a few exceptions, like a VA loan or USDA loan, it is almost always expected that borrowers will put cash towards a down payment toward their home. 

If you can put down at least 20% of the total price of your home, your chances of being approved at a decent interest rate are increased, and you may be able to avoid mortgage insurance. 

If your home costs $250,000, a 20% down payment will be $50,000. You can put down less than 20%, but that will depend on the type of mortgage you’re applying for. 

  • FHA Loans, backed by the Federal Housing Administration, require as little as 3.5% down.  
  • VA Loans, guaranteed by the US Department of Veterans Affairs, usually don’t require a down payment at all. 
  • USDA Loans, backed by the US Department of Agriculture’s Rural Development Program, have no down payment requirement either. USDA loans are for rural and suburban homebuyers who meet the program’s income limits and other requirements. 

The down payment can feel like an insurmountable amount of money to save, but don’t be discouraged. At City Creek Mortgage, we work with you from the beginning of the process, walking you through what to expect, so the process is less intimidating. 

It may take a little time to get where you’d like to be, but we have the tools to help you get there – faster! 

Take charge of your credit report. 

There’s no way around it. If you’re applying for a loan, your credit report will be scrutinized. Your credit report will show not only your credit score but evidence of on-time (or late) payments. 

We’ve had clients tell us that discussing finances puts them on edge and makes them anxious. The best way to get over that feeling is to take control. At City Creek Mortgage, we show you how to run your finances instead of letting your finances run you. 

It’s important that you know the details of your credit report and how to fix any issues. Make sure that your report contains accurate information. You can dispute any issues with the bureau reporting your information and get those items cleared. 

It may ease your anxiety to know that even if your credit is less than perfect, there is nothing on your credit report that cannot be fixed with time and effort. 

The more you know, the more you can take control and get your credit in the shape you want it to be. 

Do your research. 

Knowledge is power. The more you know, the better your position. It’s important that you research basic terminology so that you and your lender speak the same language.

Research and think through the different types of loans available. You’ll want to consider the ones that will best suit your needs. 

You’ll also want to research your lender. Compare interest rates and lender fees. Think through all your options. 

City Creek Mortgage

Be realistic. 

Buying a home is one of the most important financial investments you’ll make in your lifetime. It’s incredibly important for your long-term health and happiness that you are realistic in what you can afford. 

One way to determine how much house you can afford is by applying the 28/36 rule. This means you need to think about your debt-to-income ratio, or the total amount of your gross monthly income that’s allocated to paying debt each month. 

In the perfect scenario, your DTI, which includes only your mortgage-related expenses, should be below 28%. Your other percentage, which includes the mortgage and all other debt obligations, should be no more than 43%, though under 36% is ideal. 

If your DTI is too high, you need to reduce or eliminate debt before you apply for a home loan. 

Remember, with City Creek Mortgage, you’re not alone in thinking through your options. Our calculators and team members are here for you! 

About Us 

City Creek Mortgage isn’t your typical mortgage lender. Our professionally trained staff understands the difficulties, complications, and frustrations of shopping for a mortgage. 

We are here to walk you through the process, answer all your questions, and help you feel in charge and empowered about your decision-making. It’s important to us that you feel at home, comfortable, and secure with us. 

We worked hard to become the most trusted, respected, and loved mortgage company in Utah. Contact us TODAY to see the difference for yourself. 

Our team at City Creek Mortgage understands all the excitement and optimism that comes with buying a home for the first time. With a good support team in place, this decision can be one of the most rewarding you’ll ever make. 

Our City Creek Mortgage team is here to make this process informative, transparent, and confidence-building. We work with you to find the perfect mortgage for this big first step! Knowing this basic information will give you some things to think about before signing on the dotted line. 

Knowledge is power. 

Don’t be afraid of your financials. Dig in. Learn all you can. In most cases, any blemishes on your financial history can be made right with time and patience. 

Your first step is to review your credit report. Both your credit score and the report will help determine the interest rate you’re eligible for. You guessed it: you want a lower interest rate so that you’ll ultimately pay less for your home over the life of your loan. 

The overall credit score is essential; however, lenders look at your report, too. The credit report will show your payment habits, balances, and overall financial health. 

Adjust your habits to improve your credit score. If there are errors on your report, alert the credit bureau as soon as possible.  

Budgets are your buddy. 

In general, the rule of thumb is that if you are debt-free, you are sitting in a perfect position with lots of flexibility on how much home you can afford. Usually, if you’re debt-free, you can consider houses up to five times your household income. 

If less than 20% of your income goes to pay down debt, you can usually consider houses no more than four times your income. 

If more than 20% of your monthly income goes to pay down existing debt, you may need to shop for houses only three times your income or less. 

If these estimates don’t delight you, you may want to consider paying down your existing debt to expand your options. 

Common sense is key. 

Use good common sense when thinking about your home purchase. Buying a home can be an emotional decision. The more emotion you can remove from the actual purchase, the better. Try and think practically about what this purchase can do to elevate your financial status. It’s an investment! 

Think about how much space you can maintain with your current schedule. How much room do you want versus how much you may need? Do you plan to expand your family once you get settled? Do you have pets that require a fenced-in yard? 

Be sure to vet the neighborhood where the house you like is located. How are the schools? Are there grocery stores, doctor’s offices, veterinarians, and daycare facilities located nearby? 

Don’t get “married” to property without thinking through all your options. Using common sense now will pay off later! 

It’s not just the price of the house. 

Don’t empty your cash reserves to purchase a home. Not only do you need cash on hand for potential unexpected emergencies, but you need to know your home’s purchase price is just the beginning. 

There are lots of costs that some homebuyers don’t consider when thinking about when buying a home. Property taxes, closing costs, homeowners insurance, moving costs, even utilities will need to be factored into your buying budget. 

If you think you’d feel more secure with more money set aside, it’s always better to wait until you are at ease. Don’t try to make a home purchase that’s going to stress you out unnecessarily. Take the time to save your money and build your nest egg. 

In the long term, having the extra cash set aside will make buying a house less stressful and more rewarding, especially if an emergency arises during or right after the home-buying process. 

The City Creek Difference

City Creek Mortgage isn’t your typical mortgage company. Our small, family-owned, local business is a family to our employees and a safe place for our clients to make big decisions. 

From the very beginning in 1998, owners Mike and Tobi Roberts set out to provide a mortgage company that did right by their clients, took personal responsibility for their company, and provided quality service and an excellent product. 

For Mike and Tobi, it’s always been personal. Not only do they care about their clients, they care about their employees. When you work with us, you will notice a difference from the very beginning of your mortgage process. We want to be the most trusted, respected, and loved mortgage company in Utah. 

Call City Creek Mortgage TODAY to start your homeownership journey. We want to talk to you. 

Choosing the right mortgage may feel like a daunting task, especially if this is your first time purchasing a home. It probably feels like there are lots of moving pieces with too much confusing terminology. You may feel pressure to be sure what you choose is the best decision for you and your family. 

We get it. Our team at City Creek Mortgage wants to be sure you understand the process and feel good about all your options. From beginning to end, we walk you through all your options to ensure your choice is one you can feel great about. 

There are six main types of mortgages. We will work together to determine which is best for you. 

The Basic Six 

Not all mortgages are the same. Luckily, at City Creek, we work hard to find the mortgage that makes the most (and best) financial sense for you. We are transparent in our process so you’ll never be caught by surprise, and we explain as we go so you feel confident about your choices. 

  • Conventional. The government does not insure conventional loans. Typically, these loans are made to borrowers with stable income and work histories, good credit, and can make at least a 3% down payment. 
  • Conforming. These loans vary by geographic area and are bound by maximum loan limits set by the federal government. For example, in 2021, the Federal Housing Finance Agency set the base conforming loan limit at $548,250 for a one-unit property. 

In certain geographic regions, like New York City, maximum loan limits are higher because home prices are higher in these areas than in other parts of the country. 

  • Non-conforming. These loans cannot be sold/bought by Fannie Mae and Freddie Mac because of the loan amount and underwriting guidelines. Jumbo loans are the most common type of non-conforming loan. These are known as jumbo loans because they exceed conforming loan limits. 

For this type of loan, buyers usually need to show large cash reserves, make a down payment of 10%-20% or more, and have strong credit. 

  • Federal Housing Administration. FHA loans have more relaxed credit score requirements than conventional loans. Typically sought after by low- to moderate-income buyers likely seeking to purchase a home for the first time, these loans allow only an approximately 3.5% down payment. 

One downside to an FHA loan is that borrowers pay an upfront and yearly mortgage insurance premium that protects the lender from default for the loan’s lifetime. 

  • VA Loans. For qualified military service members, veterans, and their spouses, the VA guarantees homebuyer loans. With a VA loan, homebuyers can finance 100% of the loan amount with no required down payment. Typically, closing costs are lower, there are better interest rates, and there’s no need for loan insurance. 

There is a funding fee associated with VA loans. These fees, which may be waived depending on specific information about the service member applying, help offset the cost of this loan to the taxpayer.   

  • USDA Loans. For low-income buyers in rural areas, the US Department of Agriculture guarantees loans to make homeownership a reality. These loans require little money down for qualified buyers, as long as properties meet USDA eligibility rules. 

Two More Terms to Know

  • Fixed-Rate Mortgages. These types of mortgages are exactly what they sound like. Typically offering a 15- or 30-year repayment plan with an interest rate that never changes for the lifetime of the loan, fixed-rate mortgages promise that the borrower can rely on a relatively unchanged monthly payment, which offers great peace of mind to most. 
  • Adjustable-Rate Mortgages. With a fixed interest rate for up to the first 10 years, the rate fluctuates with market conditions after this period expires. This can be good news, depending on where the market is at the end of the ten years; however, it can also be risky if interest rates are higher than when you obtained your mortgage, and now you’re forced into higher monthly payments. 

The good news is, our team is here to walk you through all these pieces. We will help find the best mortgage for you with the terms that fit your situation best. You are not alone in this process. We’re here to help! 

The City Creek Difference

City Creek Mortgage isn’t your typical mortgage company. Our small, family-owned, local business is a family to our employees and a safe place for our clients to make big decisions. 

From the very beginning in 1998, owners Mike and Tobi Roberts set out to provide a mortgage company that did right by their clients, took personal responsibility for their company, and provided quality service and an excellent product. 

For Mike and Tobi, it’s always been personal. Not only do they care about their clients, they care about their employees. When you work with us, you will notice a difference from the very beginning of your mortgage process. We want to be the most trusted, respected, and loved mortgage company in Utah. 

Call City Creek Mortgage TODAY to start your homeownership journey. We want to talk to you. 

If you are new to the idea of homeownership and the thought of a mortgage feels intimidating, then we’re glad you’re here. Homeownership shouldn’t feel scary!  

At City Creek Mortgage, the first thing we want to do is explain the process clearly and easily. We want to be sure you understand exactly what options are available to you. Then, we want to make sure all your questions are answered. 

Before You Borrow 

At City Creek Mortgage, we want to ensure that when you’re ready, you can sign your mortgage papers with confidence. We don’t ever want your mortgage to overextend your budget, deplete your cash reserves, or cause anxiety about your payment. 

We aim to have an open and honest conversation with you about your financial health so that you know what to expect at the beginning, during, and throughout the mortgage process. It’s important to us that we help you: 

  • address any credit challenges to improve your credit score
  • determine a deposit without depleting your cash savings
  • analyze your cash flow and monthly budget to determine healthy opportunities 

Once we’ve determined the appropriate course of action, we can help you realize your dream of homeownership. 

Basic Terminology 

For obvious reasons, it’s important to know basic mortgage terminology. However, if there’s ever anything you don’t understand, please ask. Answering questions and ensuring that you feel confident about the process from beginning to end is essential to us. Some basic terms you’ll likely hear during the process are: 

  • Mortgage. A mortgage is a financial transaction, a legal commitment that exists as a piece of paper that you will repay a lender for the monies you’ve borrowed to purchase your home.
  • Rates. In its most basic sense, mortgage rates are the interest charged on a mortgage loan. Rates can change based on market conditions. In straightforward terms, the lower your rate, the less expensive your loan. 
  • APR. Annual Percentage Rate is calculated differently from your interest rate. The APR includes the overall cost of a mortgage, including the interest, closing costs, and other associated fees over the lifetime of the loan. You are entitled by law to know your APR. 
  • Closing Costs. These are all the costs you will pay at the signing of your mortgage. This includes origination charges, appraisal fees, credit report costs, title insurance fees, and other fees required as a part of the mortgage transaction. Lenders must provide you with a list of these costs in your loan estimate. 

Qualifying for a Mortgage 

No matter what – don’t be intimidated. Qualifying for a mortgage is easier than you may think. Low credit scores, no down payment, and other barriers to homeownership can often be overcome with financial planning and assistance from professionals like ours.  

The best way to start the mortgage process is by having a conversation with one of our City Creek Mortgage team members. 

Mortgage Options 

There are a variety of mortgage options available. At City Creek, we want to be sure you’re getting the right mortgage for your unique circumstance. Some terms with which you may already be familiar are: 

  • Conventional. One of the most common types of mortgages, this mortgage follows conforming guidelines and isn’t guaranteed or insured by a government organization. Individual lenders are available to provide conventional home loans. 
  • VA. VA mortgage loans are insured by the Department of Veterans Affairs (VA) and are offered to active duty military or veteran service members, depending on how long they served. The VA doesn’t lend money. It just guarantees the loan and protects the lender if the borrower fails to pay. 
  • Fixed-Rate. These mortgages offer a fixed payment over time and usually come with 15- or 30-year loan terms. With a fixed-rate loan, you can count on your monthly payment to remain relatively unchanged for the life of the mortgage. 

No matter which type of loan you decide on, you should enter into a mortgage only if you completely understand the terms and payment expectations. Not every loan will be right for you, and that’s all right. City Creek Mortgage team members are here to help and walk you through every step of the process. 

The City Creek Mortgage Difference

City Creek Mortgage isn’t your typical mortgage company. Our small, family-owned, local business is a safe place for our clients to make big decisions. 

From the very beginning in 1998, owners Mike and Tobi Roberts set out to provide a mortgage company that did right by their clients, took personal responsibility for their company, and provided quality service and an excellent product. 

For Mike and Tobi, it’s always been personal. Not only do they care about their clients, they care about their employees. When you work with us, you will notice a difference from the very beginning of your mortgage process. We want to be the most trusted, respected, and loved mortgage company in Utah. 

Call City Creek Mortgage TODAY to start your homeownership journey. We want to talk to you.