June 21st, 2023

Do you ever go through a whole Tuesday and think it is Monday? I did that yesterday and remembered that I must write my Tuesday blog!

Congratulations are in order as Santa Clarita is now the number one city in America for credit card debt and also number one in increasing credit card debt year over year. Actually, California holds 9 of the top 14 spots for credit card debt and 10 of the top 15 spots for credit card debt increase. Don’t worry; 33 of the top 35 spots belong to California and places Californians move to. All joking aside, this is becoming another epidemic, and the article I have attached is very interesting. There are $1.45 Trillion in credit card debt in the Santa Clarita Valley! So what does this mean? Inflation is kicking our butts, and we must be more careful with what we are spending. Credit cards are no longer low rates; we see them at 18-32% in most cases. You are charged interest if you have a balance from day one, and this stuff spins out of control. OK, enough preaching! What can you do?

Please talk with your clients and see how they are doing with inflation. Send them this article and let them know that you can help them. When you check in and refer them to me or someone else at Augusta Financial, we will review their information and advise them of the best plan. Sometimes the best strategy may be to sell their house and buy a new one! Did you hear that? I will repeat it. Sometimes the best plan may be for them to list and sell their house and buy a new one.

Take Cindy and Bobby Brady. Yes, they got married after their show ended, and they were never related at all. They own a house right here in Santa Clarita. They put two kids through college and have racked up $60K in student loans and $80K in credit cards. They have two car payments and some savings, but they want to downsize and cut their bills to save for retirement. They don’t want to move because they have a 2.75% fixed-rate mortgage with 27 years remaining. Their credit card interest is a mere 20% or $1333.33 per month, but they are paying off $2000.00 and charging up $1500, so it’s only getting worse. They owe $580,000.00 on their $900,000.00 house, and they can get a second mortgage and knock out the bills, but that is still a long way away.

Their Mortgage payment now is $3600, including taxes and insurance, the Student loans are $600 per month at 8% interest, and then they have the two cars for about $1500. All total = $7700.00 per month!

A $200,000.00 2nd will get them a 30-year payment at about $1755.00, and that plus the car = $5355.00

If they sell for $900,000.00 and buy for $800,000.00, they have a payment of around $6100.00. If they buy for $700,000.00, they pay around $5300.00, with just 5% down. When rates drop to 5% their payments will drop by $700 a month on the 800K house and $550 a month on the 700K house. Compare that to the above.

People have a lot of equity, and if there was this type of credit card debt and half the equity, then a second mortgage would not be an option. Quite a few people have more debt and less equity than Cindy and Bobby, and in those cases, they will have to do what we said above. 

Oh, and before you leave me on this, I have another important point. Cindy and Bobby’s credit scores dropped by 80 points from 740 to 660 due to having a high credit card debt load. We can loan them money on a Mini Bridge Loan to get their credit score back up to 740, assuming they have good overall credit and will list and sell their house. This will help them get the best rate when they go to buy! I will walk them through everything and help you get listings and buyers using this technique! These people have 300K plus in equity, and the deal looks OK! Imagine what you could do with someone with less equity!

OK, check out this link when you have a moment to cringe:

https://wallethub.com/edu/cc/credit-card-debt-study/24400

Interest rates are approaching their best levels of the day, but we have a lot of work to do. Powell feels there is still too much inflation which will keep these rates up longer than we all hope. Inflation has hit the credit cards, as we can see above. Higher debt, higher rates, etc., will slow down the economy eventually and lower interest rates.

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• Government Loans (FHA / VA) are in the high 5’s.
• Conventional Loans up to $726,200.00 are in the 6’s.
• High Balance Loans $726,201.00-$ 1,089,300.00 are in the 6’s
• Jumbo loans above $1,089,300 are in the 6’s
• 5/1, 7/1, 10/1 Arms are in the high 6’s.
• Bank statement loans - They are available with 10% down again! 7’s + depending on down and credit score.
• No income qualifier – 20% down with reserves! In the 8’s and 9’s!
• 0 down loans are in the mid to high 6’s – 660 credit score min right now, up to $740,000.00.
• Private Money lenders - hard Money Loans – 35% down!
• No Ratio Loans 30% down
• Debt Service Coverage loans with as little as 25% down
• Bridge Loans - are typically 7.99% with limited fees – But they get you where you need to go!
• 0 down California Dream for all Equity Share – Postponed until 2024!
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! Above are LA County Loan Limits.

I am around all week if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!