How much equity do I need to refinance in California?

For a rate-and-term refinance, most conventional lenders require at least 5% equity (95% max LTV). For a cash-out refinance, the standard cap is 80% LTV (20% equity required). FHA and VA refinance programs have different equity requirements — FHA Streamline requires no appraisal and minimal equity, and VA IRRRL similarly has no equity minimum.

Can I refinance with a lower credit score than I had when I bought?

Yes, as long as you still meet the minimum requirements for the loan program. FHA Streamline refinances do not require a new credit check in some cases. VA IRRRL refinances also have relaxed documentation requirements. Conventional refinances do use current credit for pricing, so a lower score may increase the rate.

How soon after buying can I refinance?

For conventional loans, there is typically no waiting period for a rate-and-term refinance, though most lenders require 6 months of payment history. FHA Streamline requires 6 months of on-time payments after the original closing and at least 210 days from the original closing date. VA IRRRL requires 7 months of payments.

What is the break-even point on a refinance?

Break-even is your closing costs divided by your monthly savings. If you pay $5,000 in closing costs and save $200/month, break-even is 25 months. If you plan to stay in the home longer than the break-even, the refinance saves money. Most refinances in the current Bakersfield market have break-even periods of 18–36 months.

Can I do a cash-out refinance on an investment property?

Yes. Investment property cash-out refinances are available up to 75% LTV on single-family properties and 70% LTV on 2–4 unit properties. Rates are higher than primary residence refinances, and credit and reserve requirements are stricter. Dan handles investment property cash-out refinances regularly.

How Mortgage Rate Buydowns Work, 2-1, 1-0, and Permanent Points Explained

A rate buydown is exactly what it sounds like: you pay money upfront to get a lower interest rate. The question is whether the upfront cost is worth the long-term savings, or in the case of temporary buydowns, whether the structure matches your actual plans. There are three primary types, and each one serves a different purpose.

Permanent Buydown: Paying Points for a Lower Rate

A permanent buydown, paying discount points, reduces your interest rate for the entire life of the loan. One discount point equals 1% of the loan amount. On a $370,000 loan, one point costs $3,700. That typically buys down the rate by approximately 0.25%. Whether it's worth it depends entirely on your break-even timeline: divide the upfront cost by the monthly savings to find how many months until the cost is recovered.

Example: $3,700 upfront reduces payment by $60/month. Break-even: 62 months (about 5 years and 2 months). If you'll stay in the home and keep this loan for more than 5 years, buying the point makes financial sense. If you might refinance or sell in three years, you'll pay $3,700 to save only $2,160, a net loss.

The 2-1 Buydown: Temporary Rate Reduction

The 2-1 buydown reduces your rate by 2% in Year 1 and 1% in Year 2, then reverts to the full note rate from Year 3 forward. If your note rate is 7%, you pay 5% in Year 1, 6% in Year 2, then 7% starting in Year 3. This gives you significantly lower payments in the first two years as you settle into homeownership, then you're at the permanent rate.

The cost of a 2-1 buydown is approximately 2% of the loan amount, held in an escrow account that the servicer draws from to make up the rate difference in Years 1 and 2. On a $370,000 loan, that's about $7,400. This cost can be paid by the buyer, the seller (common in today's market as a negotiating tool), or the builder on new construction.

The 2-1 buydown makes strategic sense in specific situations: if you expect your income to increase by Year 3 (making the higher payment more comfortable), or if you expect to refinance before Year 3 ends (so you never actually reach the full rate). It also makes sense when the seller is funding it as a concession, essentially giving you a subsidized first two years.

The 1-0 Buydown: One Year of Relief

The 1-0 buydown reduces your rate by 1% in only Year 1, then jumps to the full note rate. Lower cost than the 2-1, smaller benefit. This is the simplest version of a temporary buydown and is sometimes used when the available negotiating budget is limited.

Who Pays for the Buydown

Permanent points (for a permanent buydown) can be paid by the buyer or the seller as a concession within the allowed concession limits. Temporary buydowns (2-1, 1-0) can be funded by the buyer, seller, or builder. In the current market, sellers often fund temporary buydowns as an alternative to price reductions. The economics can work well for both parties: the seller avoids setting a low comparable sale price; the buyer gets below-market payments in the critical first years.

Break-Even Calculation for Permanent Points

Upfront cost ÷ monthly savings = months to break even. Example on $370K loan: 1 point = $3,700, rate drops from 7.0% to 6.75%, monthly savings = $59, break-even = 63 months. If you plan to stay 10+ years, buy the point. If you're likely to refinance in 2–3 years when rates fall, don't.

Common Mistake

Paying discount points when the break-even timeline exceeds your expected stay in the home. I see buyers pay $10,000–$15,000 in points to buy their rate from 7.0% to 6.5%, with a break-even of 80 months, and then refinance or sell 36 months later. The points were wasted money. Run the break-even before you pay for any points.

Bottom Line

Permanent buydowns make sense if you'll stay long enough to recoup the upfront cost. Temporary buydowns (2-1, 1-0) make sense when seller-funded, when your income is expected to grow, or when you anticipate refinancing before reaching the full rate. Always run the break-even calculation before paying for any rate reduction.