Market peaks for cash-in refinance – Orange County Register


Guess what else is skyrocketing alongside high inflation rates for 40 years? Credit card debt.

Credit card balances increased by $52 billion in the fourth quarter of 2021, according to the Federal Reserve Bank of New York. This is the largest quarterly increase seen in 22 years of data.

At 5.11%, this week’s average Freddie Mac 30-year fixed mortgage rate is nearly double its all-time low of 2.65% 14 months ago. As mortgage rates climb toward 5.3%, that could become the fastest rate to double in Freddie’s 51-year tracking history.

The number of consumers earning more than $100,000 a year who live paycheck to paycheck increased by 42% in January 2022 compared to December 2021, according to Lending Club.


But there is a silver lining to these economic numbers.

Despite skyrocketing mortgage rates, Southern California home prices are up 24% from that record high in mortgages, according to figures from CoreLogic. For many, that means having equity in their home that they can draw on to pay off their debts.

Qualified borrowers can typically cash out 75% to 80% of their principal on jumbo, conventional, and Federal Housing Administration (FHA) financing. Veterans Affairs, or VA, loans allow up to 100% cash refinancing in most cases.

For example, 80% of the value of a $1 million home means a maximum loan amount of $800,000.

I’ve seen this movie too many times in my career. As household debt increases, monthly payments can become so overwhelming for some, and these financial difficulties can turn into late payments that show up on their credit reports.

Recent late payments of any kind quickly cause your credit scores to plummet. Lower scores result in either higher borrowing costs or a denial of credit.

Ideally, an average FICO score of 740 or higher for all borrowers on a loan is super good. Once you drop below 620, there is no chance for conventional funding. The FHA and VA can provide loans to those with lower scores.

The 2010 Dodd-Frank requirement that borrowers have the ability to repay their loans prevents mortgage lenders from providing unqualified borrowers with new mortgage financing. In other words, even if you have a ton of equity, income, or – in the case of obscure mortgages – no income, bad credit can lower your chances of getting a mortgage. Leveraging equity for these borrowers usually means selling.

My suggestion is to always have enough cash in the bank as a cushion to cover at least six months of house payments and other debts (cars, credit cards, etc.). I recommend 12-month reserves for those in high-risk situations, such as having commission-based jobs or working in industries vulnerable to layoffs.

Better to have liquid funds and not need them than to need funds and not have them. If you withdraw money, take an extra to cover future payments.

Other reasons to refinance are to lower your rate or get rid of mortgage insurance.

There are only 54,000 high-quality refinance applicants in Los Angeles, Orange, Riverside and San Bernardino counties, according to recent data from Black Knight. And only 1.34 million nationwide.

Black Knight defines refi candidates as 30-year-old mortgage holders with at least 20% equity in their home, credit scores of 720 or higher who could reduce their first mortgage payment by at least 0, 75 percentage points.

If you’ve recently tried to withdraw money and were denied it, now might be a better time to get back to it. Mortgage lenders have gone from being very busy to cold as ice. The fruit at hand is gone. The industry has become more interested in tackling these more difficult transactions.

Home prices will plateau before they begin to decline. This is the top of the real estate market. Grab it if you need to, especially before mortgage rates rise further.

Freddie Mac rates the news: The 30-year fixed rate averaged 5.11%, up 11 basis points from last week. The 15-year fixed rate averaged 4.38%, up 21 basis points. Both types of loans are at 12-year highs.

The Mortgage Bankers Association reported a 5% drop in mortgage application volume from the previous week.

At the end of the line : Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $647,200, last year’s payment was $800 less than this week’s payment of $3,518.

What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages without points: A 30-year FHA at 4.625%, a 15-year conventional at 4.5%, a 30-year conventional at 5%, a -balance ($647,201 to $970,800) at 4.875%, a conventional 30-year high balance at 5.375%, and a 30-year jumbo purchase loan at 4.625%.

Eye-Catching Loan of the Week: A 30-year adjustable mortgage, locked in for the first seven years at 3.99% with 1 point.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or [email protected] His website is


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