How Does the Prime Rate Impact Loans?

In 2022, the prime rate went up by 4 points, going from 3.5% to 7.5%. This happened because the Federal Reserve wanted to better manage inflation. By July 2023, the prime rate had gone up to 8.5%

But what does all of this actually mean? What is the prime rate, and how does it impact financial products like credit cards and loans? Why does it fluctuate and how?

What is the prime rate?

The prime rate refers to the best possible interest rate a lender can offer to a borrower. Only the most creditworthy of borrowers with the lowest risk of default are eligible. As a result, the prime rate is typically reserved for corporations.

Individual financial institutions determine the prime rate, not the federal government. However, the prime rate is heavily influenced by the federal funds rate set by the Federal Open Market Committee (FOMC). In most cases, the prime rate equates to the current federal funds rate plus 3%.

How does the prime rate impact financial products?

Lenders use the prime rate as a benchmark for determining consumer interest rates on financial products like loans and credit cards. For example, a low-risk borrower might receive the prime rate plus 9% (compared to 15% for high-risk borrowers).

When the prime rate fluctuates, so do the interest rates consumers receive. Prime rate fluctuations also impact variable-rate products like credit cards, adjustable mortgages and home equity loans.

What makes the prime rate go up and down?

The prime rate isn’t fixed, has no limits and can fluctuate over time. Fluctuations tend to coincide with changes in the federal funds rate, the benchmark most commonly used to determine prime rates. But the prime rate can also be impacted by inflation and loan demand.

Want to learn more about your loan options? Get in touch.

2023 Conforming Limits – California


Are You Financially Prepared for a Home?

Homeownership is a significant milestone in many people’s lives. It’s not just about finding the perfect house; it’s also about ensuring that your finances are in order to support this long-term commitment.

This newsletter will help guide you through some essential steps to prepare your finances for homeownership:

1. Assess Your Financial Situation: Calculate your monthly income, expenses, and existing debt. Understanding your limits and capabilities will help you determine a realistic budget for your future home.

2. Establish a Budget: Create a budget that includes all housing-related expenses, such as mortgage payments, property taxes, insurance, and maintenance costs. Remember to leave room for unexpected expenses to avoid any financial strain in the future.

3. Save for a Down Payment: A general rule of thumb is to aim for 20% of the total cost, but it’s important to note that you can often have a much lower down payment if you’re willing to pay for private mortgage insurance (PMI). Consider setting up a separate savings account dedicated to your homeownership goal.

4. Improve Your Credit Score: Review your credit report, identify any errors and take steps to improve your score. Pay your bills on time, reduce your debt-to-income ratio and avoid taking on new debt in the months leading up to your mortgage application if you can.

5. Get Pre-Approved for a Mortgage: Before you start house hunting, get pre-approved for a mortgage. This process will help you understand how much you can afford and can help make your offer more attractive to sellers.

6. Plan for Closing Costs: In addition to the down payment, you’ll need to plan for closing costs, which typically range from 2% to 5% of the home’s purchase price. Include these costs in your budget and save accordingly.

7. Consult with Professionals: Seek guidance from professionals, such as mortgage experts, real estate agents and financial advisors, who can provide valuable insights and help you navigate the process.

If you have any questions or would like to learn more about your financing options, get in touch.

Getting a Mortgage With Student Debt

More than 43 million Americans have student loans. So if you’re hoping to buy a home with student loans in tow, you’re not alone.

Fortunately, student loans are treated just like any other debt when applying for a mortgage. While having lots of debt can certainly make the process more challenging, it doesn’t disqualify you by any means.

Are you hoping to buy a home while still paying off student loans? Here’s what you need to know.

  • How will student loans impact my eligibility for a mortgage? Lenders look at your debt-to-income ratio — how much of your monthly income all your debts (including your new mortgage payment) take up. Some loan programs allow you to have up to a 50% DTI, meaning your monthly debt payments come to 50% of your income.
  • What are the drawbacks of getting a mortgage with student loans? If you have lots of debt, you may get a higher interest rate on your loan to make up for the extra risk you present to the lender. You also may find it harder to pay off your student loans since you’re tying up more of your monthly income.
  • Should you pay off your loans before applying? You can, but remember: You’ll need funds for a down payment and closing costs. You might also consider consolidating or refinancing your loans, which can help you get a lower rate and monthly payment on them.
  • How can I manage a mortgage and student loan debt? Having a good budget can help you stay on top of all your debt payments. With federal student loans, you can also explore income-based programs, which set your monthly payment according to your income.

Want to know how your student loans will impact your mortgage options? Reach out today to get your questions answered.

Down Payment and Closing Cost Assistance

Low-income, first-time homebuyers may qualify for a low-interest, deferred payment loan of up to 17% of the purchase price for down payment assistance and 4%, up to $10,000 in closing costs assistance.


  • The loan funds must be used to pay a down payment and closing costs on the purchase.
  • The home you buy must be your primary residence.
  • The purchase price may not exceed $589,000, subject to periodic adjustments
  • You will need to contribute a minimum of three percent of the purchase price.
  • You must not have owned a home in the last three years.
  • There are no payments on the loan until you refinance, sell, pay off the first mortgage, or no longer occupy the property as your primary residence.
  • Your loan repayment will be made in one payment that equals the original principal loan amount plus any accrued interest.
  • You should talk to a lender about your ability to qualify for a mortgage.

Eligible Property

  • You may be able to use this program to buy a new or resale single-family home, condominium, townhome or manufactured home on a permanent foundation.
  • The home you purchase must be in an unincorporated area of San Diego County or in the city of Carlsbad, Coronado, Del Mar, Encinitas, Imperial Beach, La Mesa, Lemon Grove, Poway, San Marcos, Santee, Solana Beach or Vista. For all other cities, please contact the appropriate agency for more information.
  • Before your loan can be approved, your new house will be inspected to ensure the required standards are met. Please see Before the Inspection.

How to Apply

  • Call (888)942-5626 or email us at for more information.

How Homeowners Build Generational Wealth

Homeownership can be a pathway to building generational wealth — in fact, owning a home is so closely linked to long-term stability that it’s been one of the few life goals that’s just as common today as it was 50 or even 100 years ago.

But how does homeownership help families build wealth? What makes real estate a transgenerational tool to achieve financial security?

Numerous studies have shown that owning a home is not merely a personal goal, but a financial goal that can have a multigenerational impact. There’s more than one way that homeowning can benefit individuals and families when it comes to financial security:

Homeownership as an Investment: As property values increase, so does the value of the homeowner’s equity. This equity can be used for future investments or passed down to the next generation.

Forced Savings: Not only are mortgage costs typically less per square foot than rent, but they also help build your equity each month — in other words, you are making payments toward your future financial health.

Tax Benefits: Homeowners can leverage deductions for mortgage interest and property taxes. These deductions can reduce your taxable income, which can often result in a lower tax bill.

Stability: Owning a home can offer families a sense of permanence and belonging within a community, which can lead to better mental health and well-being.

Passing Down Wealth: As the value of a home appreciates, it can become a substantial asset that can be inherited by loved ones. It can be sold to fund other investments or continue as the family home where a new generation of memories can be made.

While a house can become a foundation for building generational wealth, it’s important to consider the potential challenges and financial barriers that can arise. Additionally, it’s important to weigh the pros and cons carefully and explore all your financing options.

Get in touch if you’d like to discuss your mortgage options or other loan opportunities.

When You Should (Not) Refinance

Refinancing is common practice for homeowners, and it’s often a smart financial move.

It can lower your payment, reduce your interest rate and more. But when it’s not the right time to refinance, it can be an unnecessary effort or even result in extra costs.

When should you think about refinancing, and when should you think twice? Here’s a quick guide to help answer these common questions:

What are the perks of refinancing?

  • It can change your payments and interest rate. If your credit score has improved significantly, for example, refinancing could result in lower costs.
  • Refinancing can also allow you to get a shorter/longer loan term than your previous mortgage or switch from a variable-rate to a fixed-rate loan according to your financial needs.
  • Cash-out refinancing can give you immediate access to funds for home improvements or large purchases.

When should I think twice?

  • If you plan on moving in the next few years. Refinancing involves closing costs (typically 3-6% of the loan amount), so you’ll want to stay long enough to make them worth it.
  • If the cost outweighs what you’d save. Even if saving money isn’t your primary goal, minor advantages may not be worth the cost of refinancing in some cases.
  • If you’re close to paying off your first mortgage. This is especially true if you refinanced a 30-year loan and got another 30-year loan, for example.

How can I prepare to refinance my mortgage?

  • Review your options and current rates. Compare their pros and cons with your current mortgage.
  • Calculate closing costs. For example, you should subtract closing costs from any savings from lower monthly payments to determine the actual amount you could save throughout the loan’s duration.
  • Check whether you can improve your finances to get better loan offers (e.g., increasing your credit score).

Have any questions about refinancing your mortgage? Get in touch today.

What to Know About Property Liens

For both homebuyers and homeowners, understanding how property liens work is important. In fact, they could impact your ability to buy a specific house or make a home cost more.

Fortunately, finding out if a property has a lien against it isn’t too hard — nor is settling a lien once one is in place.

Here are common questions and answers about property liens to help cover the important facts.

Q: What is a lien? 

A: A lien is a claim against a home or other asset (boat, car, etc.). It means the owner owes an entity money, and unless the debt is settled, the debtor can seize the asset to cover the unpaid balance. There can also be tax liens against the property when the owner doesn’t pay their taxes.

Q: Can you still buy a home if it has a lien? 

A: You can buy a home that has liens against it, but there are risks. Most importantly, a lender won’t give you a loan until the lien is settled.

Q: Should you avoid a home with a lien against it? 

A: If your dream house has a lien against it, you will need to settle the lien before buying it. You could pay the liens off yourself as part of the purchase or, in many cases, the seller can use the sale profits to settle them before closing.

Q: Are there ways to protect yourself? 

A: It’s a good idea to work with a title agency with buying a home. They will be able to do a title search and identify any liens against a home you’re interested in. You can also purchase title insurance, which protects you if any unknown liens surface later on.

There are other topics you’ll want to familiarize yourself with before becoming a homeowner. Get in touch today for more guidance.

Prequalification Versus Preapproval

When you start researching to buy a home, you’ll see the terms “mortgage prequalification” and “mortgage preapproval” thrown around a lot.

While they sound similar, they aren’t the same — and they serve different purposes in your homebuying journey.

Thinking of making an offer soon? Here’s what you need to know about prequalification versus preapproval and when they’re needed.


Getting prequalified can give you a rough idea of how much you can potentially borrow, which makes it ideal for the initial stages of your home search. It’s a relatively quick and easy way to figure out what your budget should be and learn more about what financing options are available to you.

You’ll need basic details like your income, price range and credit score. This information is quickly screened, which makes the process faster and simpler than preapproval.

Many sellers will also accept prequalification in your offer, and it is often mentioned as a minimum requirement for offers. But it may be less appealing if the seller gets offers with preapproval letters.


A preapproval is much more official and involves a thorough verification process. You’ll need to provide more information regarding your finances and employment, including important documents like tax returns. The lender will also do a hard credit check, which can impact your credit score.

It’s optimal to obtain a preapproval letter before you make an offer. It’s not necessary to obtain prequalification until you’re seriously considering a specific property for sale, but it’s best to start gathering the information you’ll need beforehand so you can receive your letter in a more timely manner.

Preapprovals give sellers more confidence, as it shows you’re serious about the purchase and financing isn’t an issue for you.

Ready to get started? Reach out today.