mortgage Tag

One of the greatest injustices of the mortgage industry is the high commission some loan officers receive for originating a home loan. In many cases, it equates to 1.5% (or more) of the total amount of the mortgage. That’s a $4,500 paycheck for closing a $300,000 loan! And where does the money for those high commissions come from? Through an increase in your interest rate. This is wrong and unjustified, in my opinion.

My personal mission for City Creek Mortgage is to eliminate the over-compensated loan officer by educating consumers about why most companies charge such high interest rates. A loan officer on salary or a lower commission rate can save the consumer money—in most cases, a lot of money.

I’m NOT saying loan officers shouldn’t have the opportunity to make a great income. I believe that the ethical model is to earn a little off a lot of loan closings vs. a lot off a few. A higher-volume team with salary-based loan officers can provide a great living for employees as well as lower interest rates for borrowers.

If you’re shopping for a home mortgage, don’t be afraid to ask your loan officer about their personal commission rate. If they stumble over their answer, be careful. Look for a salaried loan officer and I bet you’ll find a better deal.

As a bit of a contrarian, whenever things start to look too good, I begin to question the future. And given the strength of the market since the housing meltdown reversed, now is a prudent time to begin closely watching home value appreciation for any signs of a bubble.

I’m not saying I believe a correction in home values is imminent in the near term. It will happen at some point, but no one can say when with any certainty. But any time you see unsustainable growth in the housing market, you are witnessing a bubble, and as I’ve heard it said, “Whatever can’t continue must end.” I would rather consider the prospects of a housing bubble forming within the next two to four years than ignore the potential impact entirely. But I’ll let you gauge the risk yourself.

As part of the last housing crisis, indicators of our downfall began in 2005. However, consumers continued to purchase homes at a rapid pace until 2007—and even into 2008—before it was abundantly clear that we had a big problem. Had people known what to look for in 2005, many could have avoided a disaster.

I monitor five key points relative to the ongoing strength of the housing market:

  1. The median home price in relation to consumer confidence.
    • In 2006, consumer confidence hit an all-time high, and we’re at a similar point right now. Historically, when consumers feel confident, housing prices increase. However, as the recent trend in consumer confidence has not led to a relative increase in home values, we can anticipate either a drop in consumer confidence or an increase in housing prices.
  2. The number of people purchasing homes with cash.
    • When the market is hot, more people pay cash for their homes. We’ve recently seen a drop in the number of cash buyers, indicating a potential slowing in the housing market.
  3. The housing affordability index.
    • With both mortgage interest rates and home values on the rise, the housing affordability index has taken a sharp dive to a level unseen since 2009. Homes have become less affordable.
  4. The percentage of homes that increase in value month over month.
    • Although residential housing values have increased, there are many areas where prices are flat or even declining. The peak of a housing cycle is generally reached once the percentage of homes rising in value ceases to increase. The peak in our current cycle was reached in February 2017, and although this indicator could turn positive once more, it is reflective of the situation in 2005–2006.
  5. The percentage of household income that goes toward housing expenses.
    • Growth is no longer sustainable once the average percentage of household income spent on mortgage or rent payments exceeds 25%. Currently, in 20% of the major housing markets, payments average more than 25%. This is the highest percentage we have seen in a long time.

I’m not predicting a housing crash. I believe now is still a great time to buy a home, especially if you plan to live in it for a while. The relative price difference of owning versus renting overwhelmingly supports buying a home. Markets will always go through cycles. My intention is to educate and point out some of the indicators of a bubble. Maybe my thoughts will help deter buyers whose sole objective is to own a home for its appreciation value; at some point, this kind of short-term investment will no longer be an attractive option. However, the long-term reasons to buy remain firmly in place, especially with the average 4.5% growth rate on real estate. When you do the math, owning a home is a no-brainer.

As a top mortgage company in Utah, we at City Creek Mortgage are here to help with every area of your mortgage loan process. We can help you get the best financing for your new home, but we can do much more than this as well – we can also help with some tactics to help pay the mortgage off quicker.

One such tactic? Making biweekly mortgage payments instead of the more standard monthly option. Let’s look at the basics of this option, why it might be right for you, and also some important words of caution in this area.

Biweekly Payment Basics

Simply, a biweekly payment refers to you sending half your mortgage payment every two weeks, rather than paying once a month. Most mortgage loans come with a standard monthly payment option, so some buyers wonder if they can even pay biweekly – the answer is almost always yes. A few options that are usually available include:

  • The lender offers a biweekly payment option
  • A third party offers a biweekly payment option on your behalf and is paid a fee
  • You handle biweekly payments on your own end

Possible Benefits

Here are the primary benefit of biweekly mortgage payments:

  • If you make a half payment every two weeks rather than one full payment every month, you’ll end up with 13 full payments made for a calendar year rather than 12. This will reduce the principal balance on your loan, which will lower your interest totals and allow you to pay the loan off sooner.
  • In many cases, paying a half payment every two weeks is much easier to budget for based on the way you receive your paychecks.

Potential Cautions

Biweekly payments might not be perfect for every situation. Here are a few basic cautions to keep in mind:

  • Make sure your lender allows these payments and applies one of them each month to the principal balance – this is instead of holding it until the other half arrives and then processing it like a normal payment.
  • If you use a third party for these payments, be diligent on your research with them. Check to make sure fees are worth the services, and ensure they are sending payments at the proper times.
  • If you choose to make these payments on your own, check with your lender first to ensure there are no penalties and that payments will be handled in the proper format.

For more on biweekly mortgage payments, or to learn about any of our mortgage services, speak to the pros at City Creek Mortgage today.

Whether you’re looking to get a new mortgage or refinance an existing one, your credit score is one of the biggest financial factors in this world. A high credit score will help you get the best mortgage rate available and qualify for many special programs, while a low score may prohibit you from qualifying for your desired mortgage type.

At City Creek Mortgage, we’re here to help. We have a variety of loan programs for people with varying credit score ranges, and we also offer many tips to our clients for improving their score. One thing we often find helpful? Knowing how the various credit bureaus weight important factors in your score. Here are the five primary areas they inspect.

Payment History (35 percent weight)

Your history of paying off previous credit is the single most important factor in your credit score and how it changes. Things like late payments or past due charges are a big negative here, so try to avoid these at all costs.

Utilization Rate (30 percent weight)

Simply put, your credit utilization rate describes the amount you owe on all your credit accounts compared to your total credit limit. In general, it’s best to never go over 30 percent of your available credit in use – anything below this can start dropping your score.

Length of History (15 percent weight)

Not only is your payment history important, the length of time you’ve had accounts open also plays a role. Your history of payments might be great, but if it’s limited in its scope, banks still have to assume some risk.

Inquiries (10 percent weight)

This refers to any attempts you make to open new credit accounts or make credit inquiries. In some cases, opening too many new accounts in a short period of time will be viewed as a credit red flag meant to artificially inflate your utilization rate.

Types of Credit Used (10 percent weight)

How many accounts do you have open? Are you using options like revolving cards or installment plans? These will factor in as well.

For more on how credit bureaus weight your score, or to learn about any of our mortgage loan options, 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.

First-Time Homebuying Misconceptions

 

The homebuying world is exciting, but it can also be complex and somewhat imposing for first-time homebuyers. At City Creek Mortgage, we’re here to make everything as simple as possible for you as you go through the mortgage loan and home search process.

Unfortunately, a large amount of misinformation spreads across our field easily – there are a lot of amateurs posing as real mortgage experts. Let’s look at a few of the things many first-time homebuyers miss or pass over during their home search process, plus how you can avoid these issues.

Down Payments

Traditionally, it’s been expected that you pay 20 percent of the principal loan amount in a down payment up front. A recent survey showed that over a quarter of all homebuyers think this 20 percent number is a hard, fast requirement – this simply isn’t the case, and getting a home with a much lower down payment is possible in a variety of ways.

There are several loan options with lower down payments, even some that don’t involve a much higher mortgage rate moving forward. If you can get 20 percent down for the home you want, that’s fantastic; if you can’t, there are still options at your disposal.

Real Estate Agents

Many younger homebuyers don’t really understand what’s needed to facilitate buying or selling a property, and they conclude that due to the online resources available to them, they don’t need a real estate agent.

While this might rarely be true, it’s often a detriment to your search. Someone who knows and studies the market is still vital – you don’t just need that information you can find online, you need an expert who knows how to interpret it as well.

Open Houses

Another trend for younger homebuyers is a feeling that an open house isn’t needed. This may be a trend highly impacted by digital tour services now available online, but nothing can replace getting the true feel of the home by seeing it in person.

For more on avoiding common first-time mistakes when searching for a home, or to find out more about any of our 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 medium 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.

Real estate agents have a responsibility to do what is best for their clients. However, this doesn’t always happen. Getting a mortgage is a significant decision for a homebuyer. In many cases, the real estate agent will pressure clients to use their preferred lender. Unfortunately, a referral is often made to a lender that is financially or professionally supporting the real estate agent, rather than because it is the most cost-effective solution for the homebuyer.

The Truth Behind Mortgage Rates
One of the reasons other lenders have higher rates than we do is due to the level of compensation the loan officer is making. If a loan officer wants to make more money,
they simply sell their clients a higher interest rate. When this happens, the client pays more than they need to. Clearly, a real estate agent who wants the best for their clients would not want to add this additional financial burden to people they care about.

For example, a client recently called into City Creek Mortgage to compare the loan offer they received from their real estate agent’s preferred lender. The client was looking to borrow $350,000. When I shared with the client that there was enough income in the rate they were being quoted to purchase a brand-new Toyota Corolla, they were upset. Generally, we can save most clients between 20-50%. In this case, it was much more.

Lenders Who Serve The Agents
Most mortgage lenders market their services to real estate agents under the premise that they will help them grow their businesses. A business model that is designed to provide the benefit to the real estate agent generally comes as a cost to the homebuyer. For example, there are some mortgage companies that have several offices in a community just to provide the convenience to their real estate partners. Clearly, the agent’s convenience provides no value to the homebuyer. However, the homebuyer is the one paying the price each month in the form of a higher mortgage payment.

A Consumer-Focused Model
I believe the right business model for a mortgage company is designed with the homebuyers’ best interests in mind. At City Creek Mortgage our promises and guarantees are to our clients, not to real estate agents. We are a low-cost provider that is designed to keep more money in the pockets of hard working Utah families. For 20 years, this has kept our clients coming back and referring their family and friends to us for their mortgage needs.

If you need help evaluating the price offering of another lender, we can help you. We can estimate the amount of commission income priced into the loan and compare that
to what is priced into a loan offering with City Creek Mortgage. We do what is best for the homebuyer, with the long-term goal of squeezing out the margins in a mortgage industry and eliminate the over-compensated loan officer. As a result, we are the most feared second option by our competitors.

Help us get the word out. When you hear that your family and friends need a mortgage, have them call us. By simply having salaried loan officers and a commitment to make less off each loan, we save people a lot of money. We are Utah’s best mortgage choice and appreciate your continued support.

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.