mortgage tips Tag

When it comes to paying down a mortgage, budgeting is a very important area for homebuyers. Failing to stay within a budget may risk missed payments or other issues that can reflect badly on their financial profile, while those who are diligent and disciplined will leave themselves in good shape – and if you go the extra mile, a mortgage can even become a fantastic financial asset.

At City Creek Mortgage, we’re here to help you buy a home that becomes a positive investment for you in the long run. One strategy for doing so? Making one extra mortgage payment each year as part of your budget. Let’s go over the various formats you can use while doing this, plus how this practice will benefit you over time.

Ways of Doing It

There are a few different ways of making an extra yearly mortgage payment:

  • Boosting each monthly payment: Take your extra payment amount, then divide it by 12. From here, just add that amount to each monthly payment – be sure to specify that this additional amount is to be applied to your principal balance, not interest.
  • Bi-weekly payments: Instead of making one monthly payment, take that same amount, divide it in half, and then pay that amount every other week instead. Over the course of the full year, this will result in you making exactly one extra payment toward your principal amount, due to the fact that most months are slightly longer than four weeks.
  • Single lump sum: Spend the year budgeting and saving up a full additional monthly payment, then determine a date when you send it in full. Again, specify that this extra payment is meant to go toward principal only.

Why Do It?

If you have the financial flexibility to use any of the methods detailed above, you should absolutely consider it. Benefits might include:

  • Generating equity: The higher a percentage of your home that you “own” (that you’ve paid off, in other words), the more equity you have in it. This means that you get more profit if you choose to sell, and equity can also be used as a way of creating additional financing for home improvement or other areas. Extra yearly payments build equity faster for you.
  • Paying less interest: As we noted above, you’ll be ensuring your additional payments go toward your principal loan balance. This will lower the amount of interest you pay, as interest is generated as a percentage of the principal amount remaining. Over the life of the loan, you can save thousands of dollars this way.
  • Paying off early: Through a single extra yearly payment, you’ll likely pay off your mortgage several years earlier than you would have otherwise. This frees you from monthly payments faster, plus as we noted, saves you interest.

For more on how making extra mortgage payments benefits you, or to learn about any of our mortgage loan services, contact the pros at City Creek Mortgage today.

As those who have been through it before can tell you, buying a home comes with a few basic processes. These processes naturally have expected time periods in which they’re completed, and while these can vary a bit within each situation, there’s a general range you can expect heading into the mortgage and homebuying process.

At City Creek Mortgage, we can do a few things when it comes to these processes while you’re buying a home. We can help familiarize you with them, for starters, but we can also offer tips on shortening certain areas for buyers who may need to close a bit faster than normal. Why might you need to close faster on a mortgage loan, and how can you go about making this happen?

Why Close Quickly?

There are actually a number of reasons why you might need to close sooner than normal if you’re a buyer. They include:

  • You’re relocating to a new city, perhaps with date requirements for a new job.
  • You have a baby or a new pet on the way and require more space in a bigger home.
  • Your first home is for sale or has already sold, and you need a second home.
  • You’re a home flipper who has identified a hot market and is looking to capitalize on it.
  • You’ve done your research on mortgage rates and expect them to rise in the near future, so are hoping to close before this happens.

Typical Process Time Periods

The general homebuying process can vary in length depending on a few factors, including the market, the home you’re looking for, and the areas you’re searching in. You can generally plan for at last a month of searching for a home, then between another 30 and 60 days for the mortgage closing process to be completed. Basically, expect a standard homebuying process involving a mortgage to take between three and four months.

Tips for Shortening the Process

This doesn’t always have to be the case, however. There are some basic things you can do to help speed up the process, including the following:

  • Pre-approval: Pre-approval is an official process where you provide your lender with significant documentation, including credit information and other important financials. You go through the underwriting process as well, and get a detailed estimate of the price range you’ll have available to you based on the mortgages you qualify for. Pre-approval allows you to both save time and bolster your initial purchase offers in many cases.
  • Great realtor: If possible, look to a local expert in a realtor who knows your area. They can help you find great homes, and also can negotiate for you.
  • Planning and flexibility: Do as much advanced planning as you can before ever starting the process. Consider the things you’re prioritizing in your search, whether this is neighborhood quality or home amenities. Prepare your paperwork in advance, plus ensure financial areas like your credit score are in good order. At the same time, be prepared to be flexible and meet the needs of your lender or underwriter quickly to help move the process along.

For more on getting a mortgage closed out quickly, or to learn about any of our mortgage services, speak to the staff 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.

The Hidden Truth about Interest Rates

I recently made the decision to care less about being liked by people in the mortgage industry and more about transparency surrounding what I believe. For the sake of this article, I’ll focus on how much a mortgage loan truly costs an average consumer at most mortgage companies vs. what it costs at City Creek Mortgage. Further, I’ll dive into where I see the future of this industry as well as the people who work within it.

First, I want to make clear this is not a dig at my competitors. I believe most mortgage lenders are wonderful people who work for great companies. Just because I have fundamental differences in beliefs about how much companies and people in my industry should earn, doesn’t make my competitors wrong.

The $ Behind a Mortgage

Few consumers realize how much money is made in the process of a mortgage. For many well-known local mortgage companies, a $300,000 mortgage loan generates $12,000 of revenue. What consumers should understand is that this “standard” cost of originating a loan is substantially higher than the actual cost of doing so. The result is needlessly higher interest rates and closing costs for the consumer. Although “it’s just the way things are done,” I believe once people understand what is happening, this practice will come to an end.

In total transparency, a $300,000 mortgage loan closed at City Creek Mortgage will generate up to $6,000 in revenue on average. Although still a healthy income, it is significantly below what most companies make on the same loan. By choosing to make less money on each loan, we save our borrowers in both interest rate and closing costs compared to many of our competitors. Plain and simple, that’s the truth.

As I consider the future of the mortgage industry, I see what many in the industry don’t want to face. Some may disagree with my assessment. I see a time in the coming years where a computer will be able to replace most of the work done by mortgage loan originators. I will explain my thoughts below.

The Impact of Technology

Technology is making the mortgage process significantly easier, faster & more affordable. We are already at the stage where technology can automatically retrieve taxes, bank statements or pay stubs. Since this is most of the supporting documentation required for a loan, the effort required by the consumer and loan originator is decreasing. Further, many loans no longer require a physical appraisal. Once again, expediting the loan process. When combined with digital signing and instant loan approval, it’s not difficult for one to perceive a day when a mortgage loan originator is only needed on more complicated loans. It could even be that a human is needed on only 25% of all loans closed.

A Mortgage Loan Originator’s Income

In truth, the individual mortgage loan originator is usually able to set their own compensation levels. I know many that get paid 2% of each loan they close. This is in addition to what their respective company makes on each loan. For this to work, mortgage companies roll that super high commission into the interest rate they charge borrowers.

So for a $300,000 loan, not only does the company make money, but the loan officer gets $6,000 in commission. For that same $300,000 loan at City Creek Mortgage, $6,000 is the total revenue. No additional charges, or rolling commission into the interest rate like other companies. We use $6,000 to pay 30 staff members, and all our overhead. That’s why (in other companies) you can often get a lower rate by walking through an office and asking individual mortgage loan originators what their level of compensation is. Once you find the lowest plan, you can choose that mortgage loan originator and be offered lower rates and fees. Or you could do it…

The Right Way

You may be wondering how it is possible for City Creek Mortgage to make half of what our competition make on each loan. It is simple. We have a volume-based model. We have to do more loans, because we make less on each loan. We provide our loan officers with the stability of a salary and since they don’t do any marketing themselves, they can do substantially more loans per month than the typical loan originator.

I believe most mortgage loan originators who work for companies eventually will be paid a salary. An individual loan originator will no longer be able to make hundreds of thousands of dollars a year at the expense of the consumer for closing a handful of loans each month. The current system, where borrowers are paying a luxury tax each month for 30 years for overcompensated loan officers is flawed. Further, the real estate agents who claim to want the best for their clients are often the ones feeding the business to these highly compensated mortgage loan originators. It’s just wrong. Consumers shouldn’t be footing the bill for extravagant lifestyles of over-compensated mortgage loan originators. Trust me, it will change.

And that, my friends, is my explanation as to why our rates at City Creek Mortgage are so much lower than our competitors.

A new home is one of the most significant expenses you’ll ever incur, especially if it’s your first home or your first refinance. A mortgage situation can be complex and stressful, which is why the brokers at City Creek Mortgage are here to walk you through any roadblocks that may come up along the way.

Several of these roadblocks can be financial, and an unprepared applicant here might be in for a rude awakening. Here are a few important cost-related items we often advise our clients on before an error causes a delay in the process.

Closing Costs

Closing costs, which include everything from appraisal and underwriting fees to property taxes and mortgage insurance (among several other things), can be a much larger expense than many people expect. They often range from anywhere between 2 to 5 percent of a total purchase price – for a home that costs $300,000, that’s between $6,000 and $15,000 in additional expenses.

You won’t know the exact details on these costs until you receive a Good Faith Estimate, or FGE, from your lender. In addition, these costs can change after the GFE is sent. Some closing costs are negotiable, though, and with the proper disclosure requests, you can stay ahead of closing costs.

Moving Day

The actual moving day may seem like a minor expense, but this often isn’t the case. These expenses include utility deposits, cleaning supplies, appliances that aren’t included in the purchase, and any pre-move-in upgrades. Try to get estimates for these kinds of things well in advance, and leave a cushion in your budget for unexpected items that will inevitably come up.

Emergency Funds

An extra chunk of cash is absolutely vital during the home loan process. Several different glitches may take place and throw off the entire process. For example, an appraisal that’s off by a few thousand dollars could create significant price discrepancies – but there are cases where paying this extra will be fully worth it for you based on market conditions and cash on hand. This is one area where an agent with expertise in the field can be of major service.

Want to learn more about hidden costs in the mortgage realm, or any of our other services? Contact the brokers at City Creek Mortgage today.

When you’re thinking about purchasing a home, it’s a very exciting time with a lot of things happening all at once—you are searching with a real estate agent or on your own through local listings, touring homes to find out which one you might want, and putting in offers on the home of your dreams.

Sometimes in all the excitement of preparing to buy that home, though, people can forget to do one of the most important things: get pre-qualified and figure out exactly how much you can afford to pay for a home. The amount you pay for your home should go beyond just the amount you can get qualified to borrow, as there are several factors that influence whether or not you can actually pay for the home you purchase. Here are some tips to help you figure out exactly what home price range you should be looking for.

1: Calculating Your Borrowing Power

There are several factors that go into the calculation of how much money a lender will provide you to purchase a home, including:

  • Income
  • Credit history
  • Down payment
  • Employment history
  • Residence and mortgage history

Before you even start looking for a home, it is a good idea to figure out exactly how much the lender would be able to give you—this prevents you from looking at homes that are two or three times what you can afford, then being disappointed by the homes available in your price range when you have to go down in price. The good news is that virtually all lenders will “pre-qualify” you for a loan to give you an idea of where you are at.

2: Outline Your Budget

When a lender tells you how much they would be willing to lend for a mortgage, they are basing it on a general calculation that takes into account your gross monthly income, your total debt payments each month, and the estimated costs of owning your home. What it does not (and cannot) account for are your personal spending habits. If you know that you want to spend extra each month shopping for clothes or going to the movies, you need to take that into account by calculating your own personal budget and knowing how much you want to spend on a home. If you have a target payment amount (including principle, interest, taxes, and insurance), you can talk to your lender and have them help you figure out the price range of homes that will fit that budget.

3: Understand All the Costs of Buying a Home

Your mortgage payment will include several things, including the principle and interest payments for the home that you are purchasing, homeowners insurance, and property taxes—the latter two are often added to your monthly payments. If you’re not putting 20 percent down on the home, you will also have to get mortgage insurance, which will add to your monthly payments.

After all these expenses, you should also take note of other potential costs of owning a home that won’t be in your mortgage payment, but are also required every month, such as utility costs, home repairs, and homeowners association fees in some cases. By adding up all these anticipated costs (and being realistic) you can make sure you will be able to afford the home you get. You should also account for the costs of getting the loan, including mortgage application fees and closing costs. Talk to your lender to learn more about these costs.

Knowing the costs and making appropriate calculations can help you get a home you will love, and one that you can afford.