Author: AmaraBerg

K-1 Income and Mortgage Qualifying in San Diego

5 minute read

When a lender looks at your client’s Schedule K-1, the number they start with is usually not the number your client thinks it is. Lenders begin with ordinary business income reported on the K-1, then treat cash distributions as evidence that your client can actually reach that income, not as the income itself. That single distinction is behind most of the K-1 loan files I see stall in underwriting.

Key takeaways

Ordinary income on the K-1 is the starting point. Distributions demonstrate access.
The 25% ownership line changes the documentation burden substantially.
Adequate business liquidity is a real underwriting test, commonly measured with a current or quick ratio.
Two years of K-1s is the normal expectation, and a declining second year invites questions.
The extended September 15 filing deadline is the moment to catch problems, not October.

Who this is for

This is written for San Diego CPAs and tax preparers with business-owner clients: partnerships, LLCs taxed as partnerships, and S corporations. If you have spent September finishing extended Forms 1065 and 1120-S ahead of the September 15 extended deadline, the K-1s you are issuing this week will be the documents a lender reads if that client buys or refinances in the next twelve months.

I am not writing this to tell you how to prepare a return. You know that work far better than I do. I am writing it because the mortgage side of the file is where a perfectly correct return sometimes produces an outcome your client did not expect, and a short conversation in September prevents a difficult one in March.

The belief that causes the most trouble

Most business owners believe the income a lender uses is the money they actually took out of the company. It is an intuitive belief and it is usually backwards.

Under Fannie Mae’s Selling Guide treatment of K-1 income, ordinary business income reported on the Schedule K-1 may be included in the borrower’s cash flow provided the lender can confirm the business has adequate liquidity to support the withdrawal of those earnings. Distributions matter because they answer the access question. If the K-1s show a documented, stable history of cash distributions consistent with the level of business income being used to qualify, the lender generally does not need to go further into a liquidity analysis.

So a client who leaves earnings in the company for good business reasons is not disqualified from using that income. They are simply going to be asked to prove the company could have paid it out. That is a different conversation, and it is one the business’s own balance sheet usually answers.

The 25% ownership line

Ownership percentage is the hinge the whole file turns on.

Ownership	What the lender generally needs
Less than 25%	A lighter path. The borrower is usually not treated as self-employed, and the analysis leans on the K-1 itself plus a history of receipt.
25% or more	The borrower is self-employed for underwriting purposes. Expect business returns, the full K-1, and a liquidity review of the entity.

This catches people. A client with a 24% interest in one operating company and a 30% interest in a small side LLC is self-employed because of the side LLC, and the side LLC’s returns come into the file even if it produces almost nothing. When you are the one who knows the cap table, flagging that early saves two weeks.

What “adequate business liquidity” actually means

When a liquidity review is required, lenders commonly run a ratio off the business balance sheet. The current ratio divides current assets by current liabilities. The quick ratio does the same but strips out inventory. A result of 1.0 or higher is generally read as the business being able to support the withdrawal of earnings.

A few things follow from that, and they are all things a CPA controls or at least sees first:

A balance sheet loaded with inventory can pass a current ratio and fail a quick ratio. Knowing which one a lender is applying changes the answer.
A shareholder loan sitting in current liabilities can drag the ratio below 1.0 even when the business is healthy.
Year-end timing matters. A December 31 snapshot taken right after a large payables run can misrepresent a normal year.

None of that is a reason to change how you prepare the return. It is a reason to know, before the client makes an offer on a house, whether the balance sheet tells a flattering story or an awkward one.

Guaranteed payments, losses, and the second year

Three details that decide more files than they should:

Guaranteed payments to partners. These are frequently the steadiest, cleanest income on the whole return, and they are often overlooked by the borrower when they describe their income out loud. Point them out.

Losses are not neutral. A K-1 loss from a second entity generally reduces qualifying income, even if the loss was entirely non-cash. A client with a strong operating business and a small real estate LLC throwing off paper losses can be surprised by how much those losses cost on the mortgage side. The depreciation piece is often added back, but not all of it and not automatically.

Two years, trending the right way. Two years of K-1s is the normal expectation. If year two is materially lower than year one, the lower figure usually drives the analysis and the file needs an explanation. If your client had a genuinely unusual year, a short written explanation from you carries real weight with an underwriter. I have seen a two-paragraph CPA letter move a file that nothing else was moving.

The tension nobody enjoys naming

Your job includes legally minimizing your client’s taxable income. The mortgage process rewards showing income. Those two things pull in opposite directions and pretending otherwise helps no one.

I am not going to suggest anyone report income they did not earn, and I would not work with a CPA who would. The practical answer is timing. If a client is planning to buy or refinance inside the next two years, that fact belongs in the conversation while the return is still being planned, not after it is filed. Sometimes the right call is still the aggressive one and the client buys less house. Sometimes a legitimate structural choice, made early and for real business reasons, changes the picture. Either way, the client should make that trade knowingly.

For context on the borrowing side of that math: Freddie Mac’s Primary Mortgage Market Survey put the 30-year fixed national average at 6.76% for the week of September 10, 2026, up from 6.71% the prior week, with the 15-year at 6.09%. A year ago the 30-year averaged 6.35%. Those are national averages, not offers or quotes, and an individual borrower’s terms depend on the full file.

When to skip all of this

If your client’s K-1 interest is small, passive, and not needed to make the numbers work, leave it alone. Dragging a minor entity’s returns into a file that already qualifies on W-2 income adds documentation, adds conditions, and adds a chance for something to look odd under a microscope. More income on paper is not automatically a better file. Sometimes the cleanest path is the narrow one.

Frequently asked questions

Can a client use K-1 income if the business never distributed cash?

Potentially, yes, but the lender will need to confirm the business had adequate liquidity to support withdrawing those earnings. Without a distribution history, the balance sheet does the work.

Does a K-1 loss always reduce qualifying income?

Generally it reduces it, though certain non-cash items such as depreciation are commonly added back. The specifics depend on the entity type and the loan program, which is why the actual returns matter more than a summary.

My client owns exactly 25%. Which side of the line is that?

Twenty-five percent or more puts the borrower on the self-employed side. Exactly 25% counts.

How far back will a lender look?

Two years of returns is the standard expectation for a self-employed borrower. A shorter history is not automatically fatal but it narrows the options considerably.

What is the single most useful thing I can send with a client referral?

The last two years of business returns with all K-1s, and one sentence about anything unusual in them. That sentence saves more time than the rest of the file combined.

Why San Diego Deals Fall Apart in the Last 10 Days

Key takeaways

14.8% of San Diego pending sales fell through in July 2026 — up 1.3 points from a year earlier, and above the 14% national rate, per Redfin.
Deals that die in the last ten days almost always die for one of five reasons, and all five are visible earlier than most agents realize.
With roughly 6,400 active listings and about 3.2 months of supply, backup offers are thinner than they were two years ago — so a fallout costs more than it used to.
The fix is not a better contract. It is a lender who tells you about a problem in week one instead of week five.

Most San Diego deals that collapse in the final ten days collapse for five reasons: a credit or debt change on the buyer’s side, an appraisal gap nobody planned for, an insurance surprise, an HOA or condo document problem, or a walkthrough dispute that turns into a renegotiation. Every one of those has an early warning sign, and almost every one of them is fixable if it surfaces in week one instead of the week you were supposed to sign.

I am writing this because the numbers moved. According to Redfin’s July 2026 contract cancellation report, 14.8% of San Diego home-purchase agreements that went under contract in July were canceled — up 0.7 points from June and 1.3 points from July 2025. Nationally the figure hit 14%, the highest share since November 2023. Nearly one in seven.

Who this is for

San Diego listing agents who have had a deal die at day 24 of a 30-day escrow, taken the seller’s phone call afterward, and then watched the relisted property sit while the market quietly reset the price for them. Also buyer’s agents who are tired of finding out about a problem the same week the loan was supposed to fund.

You already know how this feels. A fallout is not just a lost commission. It is thirty days off the market, a stale listing history that every subsequent buyer’s agent can see, a price reduction conversation you did not want to have, and a seller who is now quietly wondering whether you were the right choice. That last part is the expensive one.

The five late-stage deal killers in San Diego

1. The buyer’s credit or debt changed after the pre-approval letter

This is the most common one and the most preventable. A buyer finances patio furniture, co-signs for a sibling, opens a store card at the appliance showroom, or takes a new car payment because they figure the house is basically done. Debt-to-income is recalculated at the final credit refresh, not at the pre-approval letter, and a $700 monthly obligation can be the difference between a clean file and a dead one.

Earliest visible signal: nothing, unless someone asks. Which is why the ask has to be scheduled — at contract, at the two-week mark, and again before the final refresh.

2. The appraisal comes in under contract price

Rising inventory means more comparable sales, and more comparable sales means more of them are below your number. Run the math with a client and it stops being abstract. On a $950,000 contract with 20% down, the buyer’s loan is $760,000 and the principal-and-interest payment at the September 3 national average of 6.71% is roughly $4,909 a month.

Now the appraisal returns at $925,000. Financing is based on the lower of price or value, so an 80% loan becomes $740,000. The payment actually drops about $129 a month — but the buyer’s cash to close jumps from $190,000 to $210,000. A $25,000 valuation gap became a $20,000 cash problem, and cash is the thing buyers do not have lying around in September.

Sometimes the appraisal is simply wrong, and there is a formal process for that. I wrote the full playbook in Low Appraisal in San Diego: The ROV Playbook for Agents — rather than repeat it here, use it.

3. Insurance

This one has moved up the list fast in San Diego County, and it barely registered five years ago. A buyer in a high fire-hazard severity zone gets a quote that is multiples of what they budgeted, or cannot bind coverage in time to close. Because lenders require evidence of insurance before funding, an insurance problem is a closing problem, not a preference problem. Fire season peaks September through November, which is exactly when this shows up.

Earliest visible signal: the property’s fire zone designation, which you can look up the day you take the listing. If the answer is yes, tell the buyer’s agent to have their client start shopping coverage in the first week, not the third.

4. The HOA or condo documents

Reserve shortfalls, ongoing litigation, special assessments, high investor concentration, deferred structural repairs — any one of these can make a project ineligible for the financing the buyer is using, and the buyer’s agent usually finds out when the lender does, which is late. Condo and townhome financing rules tightened again in 2026; I covered the specifics in Buying a Condo in San Diego: What Changed in 2026 Condo Financing.

Earliest visible signal: order the HOA package immediately, and have the lender look at it the day it arrives rather than the day underwriting asks.

5. The final walkthrough

The dishwasher that was working in April is not working now. The seller took the mounted television and left the anchors. The agreed repairs were done, but done badly. Individually these are small. Two days before signing, with a buyer who has been anxious for a month, small becomes a reason.

Earliest visible signal: the repair receipts. Ask for them when the work is done, not when the buyer is standing in the kitchen.

The early-warning table

Deal killer	When it usually surfaces	When you could have seen it
Credit / new debt	Final credit refresh, days 20–28	Any scheduled check-in after contract
Appraisal gap	Days 12–20	Your own comp review before you accepted
Insurance / fire zone	Days 18–28, sometimes at funding	Day one — the fire zone is public record
HOA / condo project issue	Days 15–25	The day the HOA package arrived
Walkthrough dispute	Days 27–30	When the repair work was completed

One thing not to do

Do not solve this by writing tighter contracts. Shorter contingency periods and bigger deposits feel like control, and in a market with roughly 3.2 months of supply they mostly just cost you offers. Buyers have choices right now. The listings that hold their buyers are not the ones with the most aggressive terms — they are the ones where somebody was checking on the loan file every week.

I will also say the unpopular part plainly: some deals should fall apart. A buyer who is stretched to the edge and whose file only works if nothing changes for thirty days is not a deal you want to force across the line. Better it dies in week two, while your seller still has momentum and a market full of other buyers.

What to actually ask your lender

Three questions, at contract, every time:

What is not yet documented in this file? Not “are we good” — what specific items are still outstanding.
How much cushion is there? If the appraisal comes in 3% light, or the buyer’s debt goes up $500 a month, does the file still work?
When are you re-checking credit, and what will you tell me if something changed?

A lender who cannot answer those in one call is a risk on your listing. That is the whole point of having a lending partner rather than a phone number. My cash-buyer clients get the same treatment on the back end — the mechanics are in Delayed Financing in San Diego.

Frequently asked questions

Is 14.8% actually high, or does it just sound high?

Both. Redfin’s own data shows the national cancellation share has moved in a fairly narrow band of roughly 13% to 14% over the past four years, so July 2026 is a high within a range, not a cliff. What makes it matter locally is direction and inventory: San Diego is above the national figure, up year over year, and there are far fewer backup buyers waiting to catch a fallout than there were in 2021.

Can I stop a buyer from opening new credit during escrow?

Not contractually, in any way you would want to rely on. You can do something better, which is make sure someone tells them, in writing, in plain language, at contract — and then reminds them. Most buyers who blow up their own file did not know they could.

What is the single highest-leverage change for a listing agent?

A standing weekly loan-status call with the buyer’s lender, on the calendar at contract. Not a text asking whether everything is fine. An actual conversation about what is still outstanding. It takes ten minutes and it catches four of the five items above.

Where do rates sit right now?

The 30-year fixed averaged 6.71% and the 15-year averaged 6.04% in the Freddie Mac Primary Mortgage Market Survey dated September 3, 2026 — up from 6.66% the prior week, and 6.50% a year ago. Those are cited national averages, not quotes, and the survey updates every Thursday. Nobody knows where they go next, including the people who sound very confident about it.

Want the weekly loan-status call built into your listings?

That is a big part of what I do for the agents I partner with: a real conversation every week on every file, and a heads-up in week one instead of week five. If you want to see how that works on your next listing, book a partnership call and we will walk through your current pipeline together.

Book a partnership call →

About the author. I am Ron Berg, mortgage broker and owner of The Berg Group, powered by C2 Financial Corp. I spend most of my week on files exactly like the ones above, and most of my referrals come from agents who got tired of surprises. More agent-facing breakdowns are on the blog, and you can always reach me directly through my calendar.

Ron Berg · NMLS #974839 · C2 Financial Corp, NMLS #135622 · Equal Housing Opportunity. All rates referenced are cited national averages published by Freddie Mac and are not an offer, quote, rate lock, or commitment to lend. Individual terms depend on credit, income, property, occupancy, and program guidelines. This article is educational and is not tax, legal, or insurance advice — consult the appropriate licensed professional for your situation.

September 10, 2026

How to Buy a House in San Diego: The Complete 2026 Guide

14 minute read. Written for first-time and move-up buyers in San Diego County — and for the people who keep getting conflicting advice from the internet.

The short version

The 30-year fixed averaged 6.71% nationally in Freddie Mac’s survey dated September 3, 2026 — up from 6.66% the prior week, and up from 6.50% a year ago.
San Diego County inventory has climbed to roughly 6,400 active listings, about 3.2 months of supply — the most since 2019. Homes are taking a median of ~28 days to sell.
More inventory and slower days-on-market means you have something buyers here have not had in five years: time to think.
The 2026 conforming loan limit for San Diego County is $1,104,100. Above that you are in jumbo territory, which is a different underwriting conversation.
The single biggest mistake I see is doing these steps out of order. Financing first, house second. Not the reverse.

Who this guide is for

I have been writing shorter pieces on individual parts of this process for a while now — down payments, affordability, condo financing, jumbo limits. This is the piece that puts them in order, because the questions I get most often are not really about any one step. They are about sequencing. People want to know what to do first.

This is for you if you are buying in San Diego County in the next twelve months and you want the actual mechanics rather than encouragement. I am a mortgage loan officer, not a cheerleader. Some of what follows is going to sound less exciting than what you read elsewhere. That is intentional.

Step 1: Understand what the 2026 market actually is

There is a version of the San Diego market that lives in people’s heads, and it is roughly 2021. Multiple offers, waived everything, decisions made in an afternoon. That market is over. It ended gradually enough that a lot of buyers never updated.

Here is what replaced it. Inventory countywide is around 6,400 listings with about 3.2 months of supply, the healthiest that number has looked since 2019. The median home is sitting roughly 28 days before it goes pending. Neither of those figures describes a frenzy. They describe a market that has come back toward balance.

What that means practically: you can see a house twice. You can order an inspection and actually read it. You can ask for a credit. You can walk away from a bad one and there will be another. None of that was reliably true three years ago.

It does not mean prices are collapsing. They are not. It means the negotiating posture has shifted, and buyers who are still bracing for a bidding war tend to overpay out of reflex.

A note on price data: you will see wildly different “San Diego median price” figures depending on the source, because different outlets measure the city versus the county, and all-property-types versus single-family only. I am deliberately not quoting one here. Days on market and months of supply are more honest indicators of what you are walking into.

Step 2: Get your financing sorted before you look at houses

This is the step people skip, and it is the one that costs them.

Looking at homes before you know your financing is like shopping without knowing whether you have fifty dollars or five thousand. It is not just inefficient — it is actively harmful, because you will fall for something outside your range and everything affordable will feel like a downgrade afterward.

What you actually want is a fully underwritten pre-approval rather than the thirty-second online version. The difference matters: a real one means an underwriter has looked at your income documents, your assets, and your credit before you write an offer, instead of after. In a market where listing agents are again scrutinizing offers, that letter carries weight a soft credit pull does not.

Start here: begin a pre-qualification. It takes about ten minutes and it costs nothing.

Step 3: Work out what you can actually carry

There are two different numbers here and conflating them is expensive.

The first is the maximum a lender’s guidelines will allow. The second is the payment you can carry without resenting your house. These are rarely the same number, and the gap between them is where financial stress lives.

I walk through the arithmetic in detail in how much house can you afford in San Diego, but the short version is that your payment is four things stacked: principal and interest, property taxes, homeowners insurance, and — in most of the county — HOA dues or Mello-Roos. In newer developments the last two can be several hundred dollars a month, and buyers routinely forget to include them until they are deep into escrow.

Do this part on paper before you fall in love with anything.

Step 4: Figure out the down payment

The twenty-percent rule is the most persistent myth in this business. It is not a requirement. It never was. It is a threshold at which mortgage insurance drops off, which is a real benefit but not an entry fee.

Conventional financing goes down to 3% for qualifying buyers. FHA sits at 3.5%. VA, for those who have earned it, can go to zero. Each of those has trade-offs in monthly cost and in how competitive your offer looks. I break the options down in what down payment you actually need in San Diego.

The honest framing is this: a smaller down payment gets you in sooner at a higher monthly cost. A larger one costs you liquidity you might want for the roof. Neither is automatically correct, and anyone who tells you otherwise without seeing your numbers is guessing.

Step 5: Decide what you are actually buying

Detached house, condo, or townhome is not only a lifestyle question. It is a financing question, and in 2026 it is a bigger one than it used to be.

Condo financing tightened meaningfully this year. Lenders are looking harder at HOA reserves, deferred maintenance, litigation, and the percentage of units that are rentals. A building that financed easily in 2022 may not today, and buyers find this out late — sometimes after they are in contract. If a condo is on your list, read what changed in 2026 condo financing before you write an offer, not after.

And if you are shopping above $1,104,100 in San Diego County, you have crossed into jumbo territory. Different guidelines, usually more reserves, often a different rate structure. The 2026 jumbo limits post covers the thresholds.

Step 6: Write the offer

With more inventory, offer strategy has changed. The reflex to strip every contingency and bid over asking made sense in 2021 and makes very little sense now.

Two things worth understanding before you write:

Seller credits versus price reductions. When a seller has room to move, buyers usually ask for a lower price. Depending on your situation and how long you plan to hold, a credit applied toward buying down your rate can be worth more per dollar than the same amount off the price. It depends on your time horizon, and the math is not intuitive. I ran the comparison in rate buydown vs. price reduction.

Appraisal risk. In a market with real price movement, appraisals occasionally come in under contract price. This is not the end of the transaction. There is a formal process for challenging it, and it works more often than most buyers assume — see the reconsideration of value playbook.

Step 7: Get through escrow without creating your own problems

Most escrow failures I see are self-inflicted, and they follow a pattern. Between offer acceptance and funding, do not:

Open a credit card, finance furniture, or buy a car. Your debt-to-income ratio is re-checked before funding.
Change jobs, go from salaried to self-employed, or take a pay structure change, without telling your loan officer first.
Move large sums between accounts without documentation. Underwriters need to source deposits, and an unexplained transfer stalls files.
Go quiet. If something in your life changes, tell me the day it happens, not the week before funding.

None of these are dramatic on their own. All of them have delayed closings.

The realistic timeline

Stage	Typical time	What actually drives the delay
Pre-qualification	Same day	How fast you send documents
Full underwritten pre-approval	2–5 business days	Self-employment, rental income, gift funds
House hunting	3 weeks – 4 months	How specific your criteria are
Offer to acceptance	1–7 days	Counteroffers, competing bids
Escrow to funding	21–35 days	Appraisal scheduling, HOA docs, condo review

Condo purchases run at the long end of that escrow window more often than detached homes, mostly because HOA documentation arrives on the HOA’s schedule rather than yours.

When NOT to buy right now

I would rather lose a transaction than put someone in a house that breaks them. There are situations where waiting is the correct answer:

You are likely to move within two to three years. Transaction costs on both ends are real. On a short horizon, renting frequently wins outright.
Your income is about to change and you know it. A pending job change, a business you are about to start, a partner going back to school. Qualify on stable income, not on income you are hoping for.
The purchase would leave you with no reserves. If closing empties the account, the first repair becomes a credit card balance. In San Diego, that first repair often arrives with the first serious rain.
You are buying because you feel behind. That is the worst reason on the list and the most common one I hear. The market will still be here.

Frequently asked

Is it better to wait for rates to drop? Nobody knows where rates go, including people who sound very confident about it. The 30-year averaged 6.71% in the September 3 survey, 6.66% the week before, and 6.50% a year ago — the pattern of the last year has been movement in both directions rather than a trend. What I can say is that the cost of a rate is changeable later and the price you pay is not. If rates fall meaningfully, refinancing is a conversation. If prices rise while you wait, that is permanent.

How much do I need in cash beyond the down payment? Plan on closing costs of roughly 2–3% of the purchase price, plus whatever reserves your loan program requires, plus a genuine cushion for moving and immediate repairs. Sellers do sometimes cover part of the closing costs — that is negotiable, and more negotiable now than it was.

Does a pre-approval hurt my credit? A mortgage inquiry has a small, short-lived effect, and multiple mortgage inquiries inside a shopping window are typically treated as one event by scoring models. Shopping is not penalized the way people fear.

Can I buy with student loan debt? Frequently, yes. What matters is the monthly payment relative to your income, not the balance. Large balances on income-driven plans are treated differently than people expect.

Should I use the listing agent’s lender? You are never required to. Compare. It is one of the few decisions in this process that is entirely yours and costs nothing to make carefully.

The order, one more time

Financing first. Budget second. Property type third. Then look. Then offer. Then protect the file until it funds.

Buyers who follow that order tend to close on time and stay comfortable afterward. Buyers who start at “look” tend to end up in one of two places — outbid on something they could not afford, or in a house with a payment they quietly resent. I have watched both, many times.

Start with the number, not the listing

Before you tour a single home, find out what you can comfortably carry in today’s market. It takes about ten minutes and there is no cost or obligation.

Start your pre-qualification →

Prefer to talk it through first? Book a call with me →

More on individual pieces of this in the buyer guide and on the blog. If you are buying this fall specifically, I wrote about the seasonal window most buyers miss.

Ron Berg — The Berg Group, powered by C2 Financial Corp. I have spent my career explaining mortgage mechanics to San Diego buyers who were tired of being sold to.

Ron Berg, NMLS #974839. C2 Financial Corporation, NMLS #135622. Equal Housing Opportunity. Rate figures cited are national averages published by Freddie Mac’s Primary Mortgage Market Survey and are not an offer, quote, or commitment to lend. All loans are subject to underwriting review, and terms available to any individual borrower will depend on that borrower’s complete financial profile and the property involved. This article is general education, not individualized financial, tax, or legal advice.

September 9, 2026

Interest Tracing in San Diego: When Cash-Out Refinance Interest Is Deductible (and When It Isn’t)

Key takeaways

Deductibility of cash-out refinance interest is generally governed by where the proceeds were spent, not by what secures the loan. That principle is the interest tracing framework in Treasury Regulation §1.163-8T.
A loan secured by a primary residence can produce interest that lands on Schedule A, Schedule E, Schedule C, or nowhere at all — sometimes all in the same loan.
The tracing clock generally starts when the money is actually spent, not when it funds. Cash-out proceeds parked in a checking account for five months are not characterized until they leave.
There is no blending. Each dollar of proceeds gets its own character, which is why a single cash-out refinance can require a three-way allocation across schedules.
With the Q3 estimated payment now behind us and the Q4 installment due January 15, 2027, a client who took cash out this year and assumed the whole payment was deductible may still be underestimating — and the documentation window closes at year-end.

Updated September 18, 2026 with current rate figures and the year-end deadline.

Short answer: the collateral does not determine the deduction. The use of the proceeds does. A cash-out refinance on a San Diego primary residence can generate fully deductible mortgage interest, fully deductible rental interest, deductible business interest, or nondeductible personal interest — and the same loan can generate several of those at once, in proportions set by how the borrower spent the money.

I write this one for the CPAs and tax preparers we work with, because it is the single most common place I see a mortgage and a tax return disagree with each other. The borrower thinks “it is a mortgage on my house, so it is mortgage interest.” The regulation does not care what they think.

Who this is for

This is for CPAs, EAs, and tax preparers with San Diego clients who pulled equity out in the last eighteen months — which, given where local equity sits, is a lot of clients. It is also for the preparer who has a Form 1098 showing $41,000 of interest and a client who cannot clearly account for where $250,000 of cash-out proceeds went.

If that describes a file on your desk, the conversation to have before year-end is not about the 1098. It is about the bank statements.

Why the 1098 is not the answer

Form 1098 reports interest paid on a loan secured by real property. It does not characterize that interest. The lender has no idea what the borrower did with the money and no obligation to find out.

So the 1098 is a starting number, not a conclusion. The characterization work happens downstream, and it happens by tracing.

This matters more after a refinance than after a purchase. On a purchase loan, the tracing is trivial: the money bought the house. On a cash-out, the “rate and term” portion generally inherits the character of the debt it replaced, while the new cash-out portion takes the character of whatever the borrower did with it. One loan, two histories.

The four destinations

Broadly, cash-out proceeds land in one of four buckets. General framework only — the specific treatment of any dollar is a determination for the client’s tax professional.

What the proceeds bought	Interest character	Generally reported	Common San Diego version
Improvements to the residence securing the loan	Qualified residence interest	Schedule A	ADU build, kitchen, roof, solar
Down payment on a rental property	Passive / rental	Schedule E	Pulling equity here to buy out of state
Capital for an operating business	Trade or business	Schedule C or the entity return	Self-employed owner funding payroll or inventory
Personal consumption	Personal interest	Generally not deductible	Debt payoff, tuition, a car, a wedding

Note the fourth row, because it is the one that surprises people. Paying off a credit card with home equity does not convert that interest into mortgage interest for deduction purposes. It converts a high rate into a low rate, which is a fine reason to do it — just not a tax reason.

And note the first row’s limit: qualified residence interest is subject to the acquisition-indebtedness cap, which is $750,000 for debt incurred after December 15, 2017. I covered how that cap behaves in San Diego, where loan sizes bump into it routinely, in the mortgage interest deduction post. Tracing decides which bucket; the cap decides how much of the Schedule A bucket survives.

The timing trap

Here is the piece that costs clients the most, and it is a sequencing problem rather than a tax problem.

Cash-out proceeds fund into a bank account. That account already has money in it. The client then spends over the following months from a commingled balance. Six months later, nobody can say with any confidence which dollars were the loan proceeds.

Tracing works on actual expenditures. When the proceeds are commingled and the trail goes cold, the fallback characterization is rarely the favorable one. The fix is embarrassingly simple and has to happen before the money moves:

Open a separate account for the proceeds. Not a sub-ledger. A separate account. Fund it at closing and spend from it directly.
Spend it on one thing, or on a small number of clearly documented things. Every transfer out should have an obvious destination.
Spend it reasonably promptly. The longer proceeds sit, the more likely they mingle with other deposits.
Keep the closing statement with the bank records. The Closing Disclosure establishes the amount and date; the bank statements establish the use. You need both halves.

When a client tells me they are pulling cash out and they have a CPA, this is the conversation I ask them to have first — not after. It takes ten minutes at the front end and it is unrecoverable at the back end.

Where this shows up in the current market

The 30-year fixed-rate mortgage averaged 6.95% in Freddie Mac’s Primary Mortgage Market Survey dated September 17, 2026, up from 6.76% the prior week; a year earlier it averaged 6.26%. The 15-year averaged 6.26%. That is a fourth consecutive weekly increase, following the Federal Reserve’s quarter-point move on September 16. Those are cited national averages published weekly, not offers or quotes.

Why that matters for tracing: at these rates, very few San Diego homeowners are refinancing purely for rate. They are refinancing for access — to a rental down payment, a business, an ADU. Which means a much higher share of current refinance volume is cash-out, and a much higher share of current refinance volume needs tracing analysis.

The mechanical side of getting equity out is covered in our cash-out refinance walkthrough. If the client’s plan is to redeploy the proceeds into investment property, the 1031 exchange financing piece covers a related structuring question worth raising in the same meeting.

The four questions to ask the client

If you have limited time before year-end, these four get you most of the way:

Was any of this a cash-out, or was it rate-and-term only? If rate-and-term, tracing is usually straightforward and the prior debt’s character carries.
What was the cash-out amount, and on what date did it fund? From the Closing Disclosure, not from memory.
Where did that money go, dollar for dollar? Ask for statements. “Improvements, mostly” is not a traceable answer.
Did the proceeds sit anywhere first, and did other deposits land in that account? This is the question that determines whether you have a clean trace or a reconstruction project.

When tracing is not the issue at all

Worth saying, because not every refinance needs this workup:

A pure rate-and-term refinance with no cash out. The replacement debt generally inherits the character of the debt retired. There is little to allocate.
A client who does not itemize. If the standard deduction wins, the Schedule A analysis is academic — though the Schedule E and Schedule C portions still matter, which is exactly why people miss them.
Small cash-out amounts spent on documented improvements. Same bucket as the rest of the loan, and the allocation is a formality.
Proceeds that went entirely to personal consumption. Nothing to trace toward a deduction. Tell the client plainly and move on.

Frequently asked questions

Is interest on a cash-out refinance deductible?

It depends on what the proceeds were used for, not on the fact that a home secures the loan. Proceeds used to improve the residence securing the debt can generally produce qualified residence interest; proceeds used for rental or business purposes are generally traced to those activities; proceeds used for personal consumption generally produce nondeductible personal interest. The client’s tax professional makes that determination on the facts.

Does a home equity line of credit follow the same rules?

The same tracing concept applies — the use of the draw drives the character. Lines of credit are harder to trace in practice because clients draw repeatedly over time and often for mixed purposes. Contemporaneous records matter even more with a line than with a lump-sum refinance.

Can one loan produce interest on more than one schedule?

Yes, and it is common. A $300,000 cash-out split between an ADU, a rental down payment, and paying off a car would generally allocate across three characterizations in proportion to the traced amounts. There is no rule that a single loan gets a single answer.

How does this affect what a client can borrow?

It does not. Tracing is a tax characterization exercise and has no bearing on underwriting, program eligibility, or loan amount. All loans are subject to underwriting review. The two analyses run on separate tracks — which is precisely why they need to be coordinated by someone.

What I would do this quarter

Pull the client list for anyone who closed a refinance in 2026, flag the cash-outs, and request Closing Disclosures plus the sixty days of bank statements that follow each funding date. Do it before year-end, while the Q4 installment and the extension-season files are both still in front of you. Reconstructing a trace in April is expensive; documenting one now is free.

If you would rather have the loan-side facts straight from the file, I am happy to walk a specific transaction with you. The homeowner guide covers the borrower-facing version of the same decision.

Have a client’s refinance you want walked through before year-end?

I will pull the loan structure, the disclosure figures, and the proceeds breakdown so your tracing analysis starts from the actual file instead of the client’s recollection: Book a 20-minute call

Ron Berg is the founder of The Berg Group, a San Diego mortgage team that works alongside CPAs, financial planners, and real estate professionals on the financing side of client decisions. Want the loan facts for a specific file? Book a call.

Sources: Freddie Mac Primary Mortgage Market Survey, survey dated September 17, 2026; Treasury Regulation §1.163-8T (allocation of interest expense); IRS Publication 936, Home Mortgage Interest Deduction; IRS estimated tax guidance.

Ron Berg | NMLS #974839 | C2 Financial Corp, NMLS #135622 | Equal Housing Opportunity. Rates referenced are cited national averages published by Freddie Mac and are not offers, quotes, or commitments to lend. All loans subject to underwriting review; program terms and availability vary. This article is general education for tax professionals and is not tax, legal, or accounting advice. Characterization of interest expense depends on the specific facts of each taxpayer’s situation and should be determined by the taxpayer’s own tax advisor.

September 8, 2026

No-Closing-Cost Refinance in San Diego: How Lender Credits Actually Work

Key takeaways

A no-closing-cost refinance in San Diego is not a refinance without costs. It is a refinance where somebody else fronts them, and you repay through either a higher rate or a bigger loan balance.
The two mechanics are lender credits (the lender pays your costs in exchange for a higher rate) and rolling costs into the balance (you finance them). They are not the same trade.
Industry figures put average refinance closing costs in a range of roughly 2% to 6% of the loan amount, with the national average dollar figure often cited near $2,200 — a number most California files clear easily once title, escrow, and our loan sizes are in play.
On a $600,000 refinance, paying about $9,000 up front instead of taking a credit that lifts the rate by roughly three-eighths of a point saves in the neighborhood of $116 a month — a break-even around six and a half years.
The real deciding question is not “which is cheaper.” It is how long until you would refinance again.

Short answer: a no-closing-cost refinance means you write no check at the closing table, not that the closing costs disappeared. Your lender either credits the costs back to you and prices your rate higher to fund that credit, or adds the costs to your new principal balance. Both are legitimate. Which one is right depends almost entirely on how long you plan to keep the loan.

This is the question I have been getting most since Labor Day, and I think I know why. Rates have been drifting in a narrow band all summer, and a homeowner sitting on a 7.5% note from 2023 is doing arithmetic that says refinance now while another voice says but what if it is better in six months. Lender credits exist precisely for that person.

Who this is for

This one is for San Diego homeowners carrying a rate from the 2023 or 2024 stretch who want to lower a payment without draining a savings account to do it. It is for anyone who has looked at a Loan Estimate, seen four figures of escrow, title, and recording, and thought: I am not spending that to save $180 a month. And it is for the homeowner who suspects they will refinance again, and does not want to pay for the same privilege twice.

That instinct is correct, by the way. The most expensive refinance is the one you pay full costs on and then replace fourteen months later. Sunk cash does not come back.

What “no closing cost” actually means

There are three ways to handle refinance costs, and only one of them is free of a trade-off — the one where you pay cash.

1. Pay at closing. You bring the money. Your rate is whatever the file prices at with no credit attached. Lowest long-run cost if you keep the loan a long time.

2. Take a lender credit. The lender covers some or all of your costs. In exchange, your rate goes up. The credit is funded by the higher-yielding loan the lender ends up holding or selling. Your balance stays where it is; your rate does the work.

3. Roll the costs into the balance. Your costs get added to the new principal. Rate stays at par, balance goes up. You pay interest on the costs for as long as you keep the loan.

People use “no closing cost” loosely for both 2 and 3, and lenders are not always careful about the distinction. Ask which one you are being shown, because the math is different.

The three paths on a $600,000 San Diego refinance

The 30-year fixed-rate mortgage averaged 6.71% in Freddie Mac’s Primary Mortgage Market Survey dated September 3, 2026, up from 6.66% the prior week; a year earlier it averaged 6.50%. The 15-year averaged 6.04%. Those are cited national averages published weekly. They are not an offer, not a quote, and not what any particular file prices at.

Using that national average as the illustration, and assuming $9,000 of total closing costs on a $600,000 loan:

Path	Rate used	Principal and interest	Cash at closing	Loan balance
Pay costs yourself	6.71%	about $3,876	$9,000	$600,000
Lender credit covers costs	about 7.00%	about $3,992	$0	$600,000
Roll costs into the loan	6.71%	about $3,934	$0	$609,000

Read the difference, not the numbers. The lender-credit path costs about $116 more per month than paying up front. Divide $9,000 by $116 and you get roughly 78 months — about six and a half years — before the cash you spent at closing starts winning.

The rolled-in path costs about $58 more per month and leaves you owing $9,000 more, which matters if you sell before the balance amortizes back down. Its break-even against paying cash is longer still, but you also gave up equity rather than rate.

Those figures are arithmetic for illustration at a national average, rounded. The actual credit-for-rate exchange moves daily and varies by loan size, occupancy, credit profile, and program. Your file will not look exactly like this table.

The question that actually decides it

Forget which option is cheapest in year thirty. Almost nobody keeps a mortgage for thirty years.

Ask instead: what is the realistic chance I replace this loan in the next three to five years? If that chance is meaningful — because you expect rates to improve, because you might sell, because a job or a family change is on the horizon — the lender credit is usually the better structure. You keep your cash. If the loan gets replaced, you never paid for costs you did not get to use.

If you are confident this is the loan you keep, and you have the cash without touching an emergency fund, paying at closing is the cheaper long-run answer and it is not close.

There is a version of this I like even better for homeowners who think rates are headed lower: take the credit, keep the payment relief now, and treat the loan as temporary by design. That is a strategy, not a compromise. I walked through the related math in how to calculate a refinance break-even, and if lowering a payment is the goal but the rate is already good, a recast may beat a refinance entirely.

How to compare offers honestly

Two lenders can both say “no closing costs” and be describing very different loans. Here is how to make them comparable.

Get a Loan Estimate, not a rate quote. It is a standardized form for a reason. A verbal rate is not comparable to anything.
Look at Section J on page 2. Lender credits appear there. If a lender claims to cover your costs, the credit should be visible as a dollar figure.
Compare the same loan amount. If one option rolls costs in, its principal is higher. Comparing a $600,000 loan to a $609,000 loan on rate alone tells you nothing.
Compare on the same day. Pricing moves. Estimates from Monday and Thursday are two different markets.
Ask for the par rate too. Knowing the rate with zero credit and zero points gives you the reference point everything else is measured against.

The Consumer Financial Protection Bureau’s Loan Estimate explainer walks the form section by section. It is fifteen minutes well spent before you talk to anybody, including me.

When a no-closing-cost refinance is the wrong move

I would rather say this here than after you have signed something.

You are keeping this loan for the long haul and you have the cash. Then the credit is just an expensive loan against your own closing costs. Pay them.
The credit only partially covers your costs. A rate bump that funds $4,000 of a $9,000 bill is a worse deal than either clean option. Ask what the credit actually covers.
You are already at or near the equity line that changes your pricing. Rolling $9,000 into the balance can push a file across a loan-to-value threshold, and the pricing on the other side of that line can cost more than the costs you were avoiding.
The payment savings are thin to begin with. If a par-rate refinance saves $150 a month and the credit version saves $40, you have done a lot of paperwork for a restaurant dinner.

Frequently asked questions

Is a no-closing-cost refinance really free?

No. The costs still exist and still get paid. You are choosing to pay them through a higher interest rate or a larger loan balance rather than with cash at the closing table. The honest way to describe it is “no cash at closing.”

How much higher is the rate on a no-closing-cost refinance?

It depends on the day and the file. The exchange between rate and lender credit is set by what the loan is worth in the secondary market, so it changes constantly. Directionally, covering a full set of closing costs typically takes a meaningful fraction of a percentage point. Ask your lender to show you the same loan at par and with a full credit, side by side, priced the same day.

Can I do a no-closing-cost refinance more than once?

Structurally, yes — that is much of the appeal. Because you never sink cash into costs, replacing the loan again later does not waste an earlier investment. Whether it makes sense each time still depends on the rate available and how long you keep each loan.

Do lender credits affect how much I can borrow?

A credit does not change your loan amount, which is one of its advantages over rolling costs in. Rolling costs into the balance does raise the loan amount and therefore your loan-to-value ratio, which can affect program eligibility and pricing. All loans are subject to underwriting review.

What I would do this month

Pull your current note rate and balance. Get one Loan Estimate showing the par rate and one showing a full lender credit, from the same lender on the same day, so you are comparing the same market. Then answer the only question that matters: is this the loan you keep, or the loan you replace? Everything else follows from that.

Our homeowner guide covers the rest of the refinance decision, including the pieces that have nothing to do with rate.

Want to see both versions of your refinance side by side?

Start with a free equity and payment snapshot, and we will run the par-rate and lender-credit paths on the same day so the comparison is real: homequityreport.com/rberg0

Ron Berg is the founder of The Berg Group, a San Diego mortgage team helping buyers, homeowners, and referral partners make financing decisions with the math in front of them. Want the comparison run on your actual balance? Book a call or start at homequityreport.com/rberg0.

Sources: Freddie Mac Primary Mortgage Market Survey, survey dated September 3, 2026; Consumer Financial Protection Bureau, Loan Estimate guidance.

September 7, 2026

Buying a Condo in San Diego: What Changed in 2026 Condo Financing

Key takeaways

Buying a condo in San Diego now depends as much on the building as on the borrower. In 2026 the lender underwrites both.
Fannie Mae eliminated Limited Project Review for condos effective August 3, 2026. Most conventional condo loans now run through a fuller look at the HOA’s finances, insurance, and project eligibility.
The standard reserve contribution for Full Review is scheduled to rise from 10% to 15% of annual assessment income in 2027, unless a project qualifies through an acceptable reserve-study alternative.
A building that misses those standards is called non-warrantable. Financing may still exist – portfolio and non-agency programs – but generally with more down and a higher rate.
Pull the HOA packet before you fall in love with the unit. It is the single cheapest thing you can do in this market.

Short answer: buying a condo in San Diego in 2026 means two approvals, not one. Your file has to work, and the homeowners association has to work. Since August 3, 2026, the shortcut most lenders used to lean on – Fannie Mae’s Limited Project Review – is gone, so the HOA’s reserves, budget, insurance, litigation, and owner-occupancy mix all get read before a conventional loan can move forward.

I have watched three condo files this summer where the borrower was never the problem. The building was. That is the shift worth understanding before you write an offer.

Who this is for

This one is for San Diego buyers looking at attached housing – a Little Italy high-rise, a North Park conversion, a Mission Valley townhome, a Carlsbad complex two blocks from the sand. It is for first-time buyers using a condo as the on-ramp, and for move-down buyers trading a yard for a lock-and-leave. If a condo is the only way the math works for you in this county, you deserve to know how the underwriting actually reads.

It is a fair thing to be frustrated about. You do everything right – save the down payment, keep the credit clean, get your documents in order – and then a stranger’s HOA board decides whether your loan happens. That is genuinely how it works now. The good news is that almost all of it is knowable in advance.

What actually changed on August 3, 2026

Fannie Mae and Freddie Mac released coordinated condo updates in March 2026 covering three areas: how projects get reviewed, how much associations must hold in reserves, and what insurance standards apply. The piece that landed first was the elimination of Limited Project Review, effective August 3, 2026.

Limited Review was the light-touch path. If a buyer put enough money down on a primary residence, the lender could skip most of the deep dive into the association. That path is closed for most transactions. What replaces it is Full Review – a real read of the HOA’s budget, reserve funding, delinquency rate, insurance coverage, pending litigation, commercial space percentage, and how much of the project is investor-owned.

Projects of ten units or fewer may qualify for a Waiver of Project Review. That waiver is not automatic, and the project still has to clear applicable eligibility and insurance requirements. Given how much of San Diego’s older coastal inventory sits in small conversions, this one is worth asking about early.

The 2027 reserve rule you should ask about today

Beginning in 2027, the standard reserve contribution requirement under Full Review is scheduled to move from 10% to 15% of annual assessment income, unless the project qualifies through an acceptable reserve-study alternative.

Translate that into plain English. If an association collects $600,000 a year in dues, the old benchmark meant roughly $60,000 a year going into reserves. The new one points toward roughly $90,000. Associations that are already thin have three ways to get there: raise dues, cut services, or commission a reserve study that supports a different funding level. Boards that do none of the three risk losing warrantable status – and when that happens, conventional financing for every unit in the building gets harder at the same moment.

So when you are touring a complex this fall, the question is not just “what are the dues?” It is “what is the reserve funding plan for next year, and has the board discussed the 2027 requirement?” Minutes will tell you. They almost always do.

The six documents to get before you write an offer

Document	What you are looking for
Current HOA budget	Line item for reserve contributions, and whether it is funded from dues or from a special assessment
Reserve study	Percent funded, and the timing of big-ticket items – roof, elevators, plumbing, deck coatings
Last 12 months of board minutes	Litigation talk, dues increases, deferred maintenance, insurance renewal problems
Master insurance certificate	Coverage type and limits, and the deductible the association carries
Delinquency report	Share of owners more than 60 days behind on dues
Owner-occupancy and commercial mix	Investor concentration and how much square footage is retail or office

You can request most of this during your contingency period, but the smarter move is to have your agent ask the listing side for the packet before you go under contract on a building you have questions about. A weekend of reading beats a canceled escrow.

What “non-warrantable” actually means for you

Non-warrantable is not a synonym for bad. It means the project does not meet Fannie Mae or Freddie Mac eligibility as written. Common reasons in San Diego: too much commercial square footage in a mixed-use building, an investor-heavy complex, an association in active litigation over construction defects, or reserves that simply are not funded.

Financing may still exist. Depending on the borrower and the project, that can mean portfolio loans, dedicated non-warrantable condo programs, bank-statement programs, or other non-agency options. These generally ask for a larger down payment and carry a higher rate than an agency loan, and not every project will qualify for them either. If a building you love turns out to be non-warrantable, the right question is not “can this be financed” but “what does the alternative cost per month, and am I comfortable with it for as long as I plan to own?”

Run the dues through the payment, not around it

Here is the part buyers consistently underweight. HOA dues are not a utility bill. Underwriting treats them as housing expense, dollar for dollar, exactly like principal and interest.

The 30-year fixed-rate mortgage averaged 6.71% in Freddie Mac’s Primary Mortgage Market Survey dated September 3, 2026, up from 6.66% the prior week; a year earlier it averaged 6.50%. The 15-year averaged 6.04%. Those are national averages, published weekly – not an offer, not a quote, and not what any particular file will be priced at.

At that national average, every $550 a month of HOA dues absorbs roughly the same monthly dollars as about $85,000 of additional mortgage. Read that again, because it reframes the whole search. A $650,000 condo with $550 dues is not competing against a $650,000 house. In monthly terms it is competing much closer to a $735,000 one.

An illustration, using that national average and rounding: a $650,000 condo with 10% down leaves a $585,000 loan. At 6.71% over 30 years, principal and interest runs about $3,779. Add roughly $596 for property taxes at about 1.1%, $550 in dues, an HO-6 policy, and mortgage insurance at that down payment, and you are meaningfully above $5,000 a month before a single light bulb. Your actual numbers will differ – this is arithmetic for illustration, not a quote.

When a condo is the wrong move – and I will tell you so

Not every buyer should be shopping attached housing this year, and I would rather say it here than on a call after you have written an offer.

You are planning to move within about three years. Between closing costs, transfer costs, and a market that is more balanced than it was, a short hold rarely leaves room to come out ahead.
The dues are already the stretch. Dues go up. Reserves are going to demand more from associations, not less. If today’s number is the ceiling, next year’s number is a problem.
The reserve study shows a roof or elevator due in the next two years and the reserve is thin. That gap gets closed by a special assessment, and you will own it.
You want to rent it out shortly after closing. Investor concentration is one of the things Full Review looks at, and an association’s own rental caps may bind before the lender’s do.

A condo is a very good answer to the San Diego affordability problem when the building is healthy and the hold is long. Those two conditions do most of the work.

How I would sequence it this fall

Get your own financing picture straight first – income documentation, credit, assets, and a realistic monthly ceiling that already includes dues.
Shortlist buildings, not just units. Ask about project review status before you tour a fourth time.
Request the HOA packet and actually read the minutes. Twelve months takes an hour.
Ask your lender to look at the project early rather than at underwriting. Finding out in week one is free; finding out in week three is not.
Keep a backup building on the list. In a market with more inventory than we have seen in years, you have that luxury.

If you want the broader seasonal picture, I wrote about the San Diego fall buying window a few days ago, and the down payment question earlier this summer. Both pair well with this one. Our buyer guide walks the whole process start to finish.

Frequently asked questions

Can I still buy a condo with less than 20% down in San Diego?

Low-down-payment options for condos still exist, including agency and government programs. What changed is that the project review got stricter, not the borrower down payment tables. The building has to clear eligibility either way.

How do I find out if a building is warrantable before I make an offer?

Ask your lender to check the project early. Some projects carry a prior review status; others need a fresh look at current HOA documents. Either way it is a question best asked in week one.

What happens to my loan if the HOA loses warrantable status mid-escrow?

It depends on the reason and the timing. Sometimes the association can cure the issue – an updated insurance certificate, a corrected budget. Sometimes the file has to move to a non-agency program with different terms. This is exactly why the HOA packet belongs at the front of the process.

Are FHA and VA condo rules the same as Fannie Mae’s?

No. FHA and VA maintain their own condo project approval lists and standards, separate from the conventional changes described here. A building can be approved on one track and not another, which is worth checking if you are using a government loan.

Thinking about a San Diego condo this fall?

Let’s look at your numbers and the building’s numbers at the same time, before you write an offer. Start your pre-qualification here and we will talk through what the dues do to your range: buyerprequalify.com/rberg0

Ron Berg is the founder of The Berg Group, a San Diego mortgage team helping buyers, homeowners, and referral partners make financing decisions with the math in front of them. Questions about a specific building? Book a call or start at buyerprequalify.com/rberg0.

Sources: Freddie Mac Primary Mortgage Market Survey, survey dated September 3, 2026; Fannie Mae Selling Guide project eligibility requirements.

September 6, 2026

Delayed Financing in San Diego: How Your Cash-Buyer Clients Get Their Money Back Out

Key takeaways

Delayed financing lets a borrower who bought a home with cash take a cash-out refinance immediately, instead of waiting the usual six-month seasoning period.
The loan amount is generally capped at the original purchase price plus documented closing costs, or the standard cash-out limits on the current appraised value — whichever is lower.
The part most people miss is on your side of the desk: IRS Publication 936 treats a mortgage taken out within 90 days after a purchase as debt used to buy the home. Miss the window and the character of the interest can change.
Clients who liquidated a taxable account to buy cash have a realized gain sitting in Q3, due September 15 — and the refinance proceeds are often the cleanest place to fund it.
Rates are not the reason to do this. As of the September 3, 2026 Freddie Mac survey, the 30-year fixed averaged 6.71%. Liquidity is the reason.

Every fall I get the same call from a CPA, usually in the second week of September, usually about a client who did something smart and slightly terrifying: they wired cash for a house.

It worked. In a San Diego market where a clean, non-contingent offer still moves a seller more than another $20,000 does, cash wins. But now the client is sitting on an unlevered house and an empty brokerage account, the Q3 estimated payment is due September 15, and somebody has to explain how the money comes back out.

That mechanism has a name — delayed financing — and it is one of the few places where the loan calendar and the tax calendar collide hard enough to matter. This is the version I wish more CPAs had in front of them before the client buys, not after.

Who this is for

You are a CPA, EA, or fiduciary advisor with a San Diego client who:

bought a primary residence, second home, or investment property with no mortgage, using cash, a brokerage liquidation, a margin loan, a HELOC on another property, or a short-term bridge from a family entity;
always intended to finance it, and treated the cash close as a bidding tactic; and
now wants the liquidity back — for a tax bill, a business, a second purchase, or simply because a concentrated position in one house is not a plan.

If the client bought with a mortgage already in place, this is not the tool. That is an ordinary cash-out refinance, with ordinary seasoning rules.

How the loan side actually works

Under the agency delayed financing exception, a borrower who purchased a property for cash can be treated as a cash-out refinance borrower right away rather than waiting six months from the purchase date. The conditions are mechanical, which is good news — mechanical means you can check them in advance.

Requirement	What it means in practice
Arm’s-length purchase	A gift, an inheritance, or a transfer between related parties does not qualify. The client has to have actually bought it.
No existing mortgage on the property	The purchase itself must have been unencumbered. Financing on a different property is fine — see the next row.
Source of funds documented	Bank statements, brokerage statements, the wire. If any of the purchase money came from borrowing — a HELOC on the old house, a margin loan, a business line — that borrowing generally has to be repaid out of the new loan proceeds.
Settlement statement	The CD or ALTA statement from the purchase drives the math. Keep it. Clients throw these away constantly.
Loan amount cap	Generally the lesser of (a) the original purchase price plus documented closing costs, points, and prepaids, or (b) the standard cash-out limits applied to the current appraised value. Current agency guidelines commonly cap a one-unit primary residence cash-out at 80% LTV, with lower limits for second homes and investment property.
Title	If the property went into an LLC or a trust at close, the vesting has to be worked out before application, not during underwriting.

Notice what the cap does: it returns the client’s basis in cash, not their appreciation. A client who bought a $1.4M house for cash in June and watched it appraise at $1.5M in September does not get to pull $1.2M out. They get back up to what they put in, subject to LTV. That is usually exactly what they wanted, but it is worth saying out loud before anyone builds a plan around a bigger number.

The 90-day clock — the part that belongs on your calendar, not mine

Here is where the two calendars collide.

The loan world cares about the six-month seasoning rule. The tax world does not care about seasoning at all — it cares about tracing. Under the interest tracing rules, what makes mortgage interest deductible as home acquisition interest is what the borrowed money was used for, not what the loan happens to be secured by.

IRS Publication 936 provides that a mortgage taken out within 90 days after the home is purchased may be treated as having been used to buy the home, up to the amount of the purchase price the taxpayer paid within the 90 days before the loan. Outside that window, the analysis is different, and the client may be looking at debt that is secured by the residence but not characterized as acquisition indebtedness.

I am not going to tell you how to run that analysis — that is your work, and the facts drive it. What I can tell you is that the 90 days runs from the purchase, and a refinance takes 21 to 30 days on a clean file. Which means the practical deadline for starting the loan is roughly day 55 to day 60 after close, not day 89. Clients who call me on day 80 are already in a bad spot, and it is a bad spot that was completely avoidable.

If you have a client who is even thinking about a cash close this fall, the single most valuable thing you can do is put a 55-day tickler on the purchase date. It costs nothing and it preserves an option that expires quietly.

This is the same category of problem as the timelines in a 1031 exchange: the tax result is decided by a calendar, and the financing has to be started early enough to land inside it.

The September 15 overlap

The reason this comes up now, every year, is the Q3 estimated payment.

A client who sold appreciated stock in Q2 or Q3 to fund a cash purchase has a realized gain with no withholding attached to it. The house absorbed the cash. The estimate is due September 15. And the most liquid asset the client owns is now a residence with no lien on it.

Delayed financing is often the cleanest bridge between those two facts — assuming somebody started it in time. When it is not started in time, the alternatives are all worse: a HELOC at a variable rate, a margin call risk, or an underpayment penalty the client will absolutely remember at filing.

Rates are relevant here but they are not the driver. The Freddie Mac Primary Mortgage Market Survey for September 3, 2026 put the 30-year fixed at 6.71%, up from 6.66% the prior week, with the 15-year at 6.04%. A year ago the 30-year averaged 6.50%. Those are national averages, not offers, and no individual file is priced off them. The point is simply that 6.71% money against a house is a different instrument than an underpayment penalty or a forced sale of a concentrated position, and the comparison a client should be running is that one — not “is 6.71% a good rate.”

When to skip it

I would rather lose the loan than watch a client do this for the wrong reason. Delayed financing is the wrong call when:

The client genuinely does not need the liquidity. An unlevered primary residence is a legitimate position for someone in or near retirement. Do not manufacture a reason to lever it.
The property was inherited or gifted. It does not qualify, and no amount of documentation changes that.
The client is past the tax window and the interest character matters to them. Sometimes the honest answer is that the cheap version of this expired and the remaining options need to be priced accordingly.
The client’s income has changed since the purchase. A cash purchase requires no income documentation. A refinance does. Self-employed clients in particular can buy with cash on a strong balance sheet and then run into an income picture that looks nothing like the balance sheet — which is its own conversation about qualifying income, and worth having before the wire goes out.
The purchase money came from a source that cannot be documented. Undocumented funds are a hard stop, not a hurdle.

What I need from you to move fast

When a CPA sends me one of these, the file moves in days instead of weeks if the client shows up with:

the purchase settlement statement (CD or ALTA);
the two months of statements showing where the purchase funds came from;
the closing date, in writing, so we can count the 90 days together;
the payoff details on anything that was borrowed to fund the purchase; and
the current vesting on title.

That is the whole list. Everything else is normal underwriting.

Frequently asked questions

Does delayed financing require a different loan program?

No. It is a cash-out refinance that is permitted to skip the seasoning requirement because the purchase was unencumbered. Pricing follows standard cash-out pricing, which typically carries an adjustment relative to a rate-and-term refinance.

Can the client take out more than they paid?

Generally not under the delayed financing exception — the cap is tied to the documented purchase price plus closing costs. A client who wants to access appreciation is usually looking at waiting out the standard seasoning period and doing a conventional cash-out afterward.

Does this work on investment property?

The exception exists for primary residences, second homes, and investment properties, but the LTV limits and pricing differ meaningfully by occupancy, and investment property caps are lower. Run the specific property before the client builds a plan on it.

What if the client bought in an LLC?

It can usually be worked out, but it has to be worked out early — vesting changes take time and the 90-day tax window does not pause for them.

Is 6.71% a good time to do this?

That is the wrong question. The right question is what the client’s alternative cost of liquidity is. Compare the loan to the actual alternatives — not to a rate they remember from 2021.

Have a client closing with cash this fall?

Send them to me before the wire goes out, not after. A fifteen-minute call up front usually preserves the 90-day window, the documentation, and the option — and it costs your client nothing.

Book a CPA partner call → | Start a client review →

Ron Berg is a mortgage advisor with The Berg Group, powered by C2 Financial Corporation, working with San Diego buyers, homeowners, and the CPAs and advisors who refer them. He writes about the mechanics of the loan side so the people advising on the tax side are not guessing.

Ron Berg · NMLS #974839 · C2 Financial Corporation, NMLS #135622 · Equal Housing Opportunity. Rates cited are national averages published by the Freddie Mac Primary Mortgage Market Survey and are not offers, quotes, or commitments to lend. All loans are subject to underwriting review, and terms may vary by borrower, property, and program. This article is educational and is not tax or legal advice — taxpayers should rely on their own CPA or tax advisor for the treatment of any specific transaction.

September 4, 2026

Low Appraisal in San Diego: The ROV Playbook for Agents

7 minute read

Short answer: a low appraisal in San Diego is not a verdict — it’s a document, and documents can be challenged. Since May 1, 2024, Fannie Mae, Freddie Mac and HUD have used aligned requirements for a borrower-initiated reconsideration of value (ROV): a formal, one-per-appraisal process where the borrower submits additional comparable sales and factual corrections through the lender, and the appraiser has to respond in writing. Most agents I talk to have never been walked through it. That’s the gap this article closes.

Key takeaways

An ROV is a structured challenge, not a request for a second appraisal.
The borrower gets one ROV per appraisal report. You get one shot — make it count.
Appraiser Independence Requirements mean you cannot call the appraiser. Everything routes through the lender.
Comps win ROVs. Opinions, urgency and frustration do not.
Even when the value doesn’t move, the appraiser must correct factual errors in the report.

Who this is for

San Diego listing and buyer’s agents who just got the call nobody wants — the appraisal landed under contract price, the buyer is spooked, the seller is dug in, and everyone is looking at you to fix it. If you’ve been in the business since 2021, you may have gone years without seeing an appraisal gap. That’s changing, and it’s worth understanding the mechanism before you need it.

Why low appraisals are showing up again

The math is not mysterious. According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed averaged 6.66% as of the August 27, 2026 survey — up a hair from 6.65% the week before, and close to the 6.56% of a year earlier. Freddie Mac’s commentary on that release points to more homes coming on the market and slower price growth in many areas.

That combination is exactly the environment that produces appraisal gaps. When prices climb fast, appraisers work with comps that closed below where the market currently is, and sellers get the benefit of the doubt. When price growth flattens and inventory builds, the opposite happens: soft comps enter the data set, and an appraiser choosing among them can land under a contract price that was written off the three hottest sales on the street.

San Diego County is still a strong market — the county median sat near $1,085,000 in June 2026, up roughly 5.9% year over year, with median time on market around 18 days. But strong-on-average is not the same as uniform, and a contract written at the top of a micro-market is where these calls come from.

Rates cited here are national averages from Freddie Mac’s weekly survey. They are not an offer, a quote, or a rate available on any particular file.

What a reconsideration of value actually is

An ROV is a request that the original appraiser re-examine their own report in light of information they may not have had. It is not a second appraisal, it is not an appeal to a different appraiser, and it is not a negotiation.

Per Fannie Mae’s published ROV requirements and FAQs — with the full policy in Selling Guide section B4-1.3-12, Appraisal Quality Matters — a few rules shape everything about how you should approach it:

One per report. The borrower may request a maximum of one ROV per appraisal report. A weak first attempt spends the only attempt.
The lender is the channel. The lender provides the form and required disclosures, reviews the request for completeness, and sends it to the appraiser.
Incomplete requests get fixed, not forwarded. If an ROV doesn’t meet the minimum requirements, the lender is expected to work with the borrower to fill the gaps first.
Errors get corrected either way. If the ROV surfaces a factual error, the appraiser must update the report and comment on the change — even when the value opinion doesn’t move.
Material deficiencies must be resolved. Where an ROV identifies material deficiencies, the lender is required to work with the appraiser to have them corrected.
Appraiser Independence still governs. ROVs must comply with AIR. This is the part agents get wrong most often — a well-meant call or email to the appraiser can compromise the file.

Worth knowing: the value conclusion remains the lender’s call. Fannie Mae is explicit that if an ROV comes back with no value change, the borrower doesn’t get to order a fresh appraisal on that loan.

What makes an ROV work

I’ve watched these succeed and fail, and the difference is almost never the cover letter. It’s the comparable sales.

A strong package is short, factual, and does the appraiser’s work for them:

Two to four alternative closed comps, each with a one-line reason it’s a better match than what was used — closer in proximity, closer in gross living area, same school attendance area, same view corridor, same street orientation. Not “this one sold higher.”
Factual corrections with proof. Wrong square footage, a missed bedroom count, a permitted ADU logged as unpermitted, finished space counted as storage. Attach the permit, the tax record, the floor plan.
Documented improvements the appraiser could not see — a re-pipe, a new roof, a panel upgrade, solar that’s owned rather than leased. Invoices and permits, not adjectives.
Nothing else. No contract price framed as the target, no market commentary, no emotion. Anything that reads as pressure on the value conclusion hurts the request.

The most common self-inflicted wound: sending nine comps. Nine comps tells the appraiser you searched until you found numbers you liked. Three tight ones tell them you understand the assignment.

Your realistic options when the number comes in low

Path	When it fits	What it costs
Reconsideration of value	You have genuinely better comps or a factual error to document	Days, not weeks — and your one shot per report
Renegotiate price	The comps honestly support the appraiser, and the seller has room	Seller proceeds; often the fastest clean fix
Buyer covers the gap	Buyer has reserves and wants the house	Cash at close; changes the buyer’s whole picture
Meet in the middle	Both sides want to close and neither wants to eat it alone	Split the difference; usually the deal that survives
Restructure the financing	The gap moves loan-to-value enough to matter	Worth a lender conversation before anyone panics

When I tell agents to skip the ROV

This is the part that builds trust with the other side of a transaction, so I’ll be blunt about it: most low appraisals should not be challenged.

Skip it when your “better” comps are further away, larger, or in a different attendance area. Skip it when the only argument is that the contract price was the contract price. Skip it when the appraiser used the closest, most similar, most recent sales and simply reached a number nobody likes. Filing a thin ROV burns four to seven days of a contingency period, spends the single attempt you get, and hands the buyer a written confirmation of the value you were hoping to move.

Knowing when not to fight is worth more to your client than knowing how to fight.

The systems angle

Here’s what I actually want you to take from this. Every agent I know handles the low-appraisal call as an emergency — scrambling for comps at 8 p.m., unsure who to send them to, unsure what the lender needs.

It doesn’t have to be an emergency. It’s a checklist. Build it once: who on the lending side receives the ROV request, what your MLS comp export needs to include, where you keep permit and improvement documentation from listing intake, and the one-page explanation you send the client so they hear the process from you instead of from Google at midnight.

We’re in the middle of the same exercise on our side of the business — turning things we “just handle” into written processes somebody else can run. It’s unglamorous work, and it’s the entire difference between a practice and a business. This is a small one, and it pays for itself the first time a deal that would have died closes instead.

If you want the front end tightened up too, it’s worth reading how a fully underwritten pre-approval changes what your offer means to a listing agent, and how a rate buydown compares to a price reduction when you’re advising on structure.

Frequently asked questions

Can I contact the appraiser directly with better comps?

No. Appraiser Independence Requirements apply to ROVs, and direct contact intended to influence a value conclusion is exactly what AIR exists to prevent. Route everything through the lender.

How many reconsiderations of value can we request?

One per appraisal report, per Fannie Mae’s requirements. The borrower may cancel a request, but you don’t get a second bite because the first came back unchanged.

If the ROV fails, can the buyer order a new appraisal?

Not on the same loan. Fannie Mae is clear that whether to accept the appraiser’s conclusions is the lender’s responsibility. A new appraisal generally means a new loan file.

Does the appraiser have to fix errors even if the value stays put?

Yes. For each borrower-initiated ROV the appraiser must update the report to correct errors and comment on the changes. Sometimes the corrected report is the win, because it’s the document that follows the property.

Let’s build your low-appraisal checklist

I’ll walk your team through the ROV process end to end, hand you the comp-package template, and set up who to call so the next one is a process instead of a fire drill. No pitch, no product list — just the systems side.

Book a partnership call →

Ron Berg — The Berg Group, powered by C2 Financial Corp. I work with San Diego agents, CPAs and financial advisors on the financing side of their clients’ biggest decisions, and on the systems that make referral relationships predictable instead of accidental. Book a partnership call.

Ron Berg | NMLS #974839 | C2 Financial Corp, NMLS #135622. Equal Housing Opportunity. This article is educational and is not an offer to lend, a rate quote, a commitment to make a loan, or a guarantee of any loan term or outcome. Rates referenced are cited national averages from Freddie Mac’s Primary Mortgage Market Survey and are not available to any specific borrower. Appraisal and underwriting requirements are set by the applicable investor, agency and lender and are subject to change. Nothing here is tax or legal advice.

September 3, 2026

Mortgage Recast vs. Refinance in San Diego: Lower Your Payment Without Losing Your Rate

Key takeaways

A mortgage recast re-amortizes your existing loan after a large principal payment. Same rate, same payoff date, smaller monthly payment.
A refinance replaces the loan entirely — which in September 2026 means trading your old rate for something near the 6.66% survey average.
On an illustrative San Diego loan, a $150,000 lump sum plus a recast cut the payment by about $731 a month. Refinancing the same balance raised it.
Recast fees typically run $150 to $500. No appraisal, no credit pull, no new closing costs.
The catch: FHA, VA, and USDA loans cannot be recast. Neither can most loans where you would rather have the interest savings than the cash flow.

If you are sitting on a mortgage rate that starts with a 3 and you have come into a chunk of money, the mortgage recast vs. refinance question in San Diego has a much clearer answer right now than it did five years ago. And most homeowners have never heard of the option that wins.

Here is the short version: a recast keeps your rate and lowers your payment. A refinance at today’s pricing would hand back a rate you will never see again. For a homeowner with a 2020 or 2021 loan, that is not a close call.

Who this is for

This one is for San Diego homeowners who locked something in the 2s or 3s and have since had a liquidity event — a bonus, a vested equity grant, an inheritance, proceeds from selling a rental or an out-of-state property. You have cash. Your payment feels heavy anyway, because everything around it — insurance, taxes, tuition, groceries — went up while your P&I stayed put.

You are not alone in the rate part. Per FHFA’s National Mortgage Database, right around half of all outstanding U.S. mortgages still carry a rate below 4% as of early 2026. FHFA’s own research on the lock-in effect found that for every percentage point the market rate exceeds your note rate, your probability of selling drops about 18.1%. That is the statistical version of what you already feel: the loan is the asset now.

Which is exactly why so many people ask me the wrong question. They ask what refinancing would cost them. The better question is whether they need to touch the loan at all.

What a mortgage recast actually is

A recast — servicers call it re-amortization — works like this. You make a large one-time principal payment. Your servicer then recalculates your monthly principal and interest using three inputs: your new lower balance, your existing interest rate, and your remaining term. Fannie Mae’s servicing guidance spells out that exact recast calculation.

Nothing else changes. Same note. Same rate. Same payoff date. No appraisal, no income documentation, no credit pull, no title work, no escrow account rebuild. Most servicers charge a flat processing fee somewhere between $150 and $500 and require a minimum curtailment — commonly $5,000 to $10,000, though some set it higher or require a minimum percentage of the balance.

A refinance is surgery. A recast is a spreadsheet correction your servicer performs for the price of a decent dinner.

The math on a real San Diego balance

Take an $850,000 loan originated in September 2021 at 3.25% — an extremely ordinary San Diego purchase from that stretch. Five years of payments in, the balance is about $759,100 and P&I runs $3,699 a month. Now suppose $150,000 lands in your account.

Option	Rate	New P&I	Change
Do nothing	3.25%	$3,699	—
Pay $150,000 down, no recast	3.25%	$3,699	$0 — payoff moves up ~6.8 years
Pay $150,000 down and recast	3.25%	$2,968	−$731/mo
Pay $150,000 down and refinance 30 yr	6.66%	$3,914	+$215/mo

Principal and interest only, illustrative. Excludes taxes, insurance, HOA, and any mortgage insurance. Refinance row uses the Freddie Mac PMMS 30-year average of 6.66% as of 8/27/2026 and ignores closing costs, which would make it worse. Not a quote.

Read the bottom row twice. You could hand the lender $150,000 of your own money, pay several thousand more in closing costs, and walk out with a higher payment than you have today. That is the lock-in effect in one line.

San Diego homeowner comparing a mortgage recast vs. refinance at the kitchen table

The honest trade-off nobody puts in the brochure

Recasting is not free money, and I would rather you hear the downside from me than find it in year four.

Look again at row two of that table. If you put the same $150,000 toward principal and skip the recast — keep making the $3,699 payment you are already making — the loan pays off in roughly 18 years instead of 25, and you pay about $198,500 in remaining interest. Recast instead and you pay about $281,400. Same lump sum, same rate. The recast costs you roughly $83,000 in additional lifetime interest.

So which is right? It depends on what is actually scarce in your life. If you have plenty of monthly margin and you want to be debt-free sooner, prepay and leave the payment alone. If your monthly number is the thing under pressure — you are self-employed with lumpy income, you are carrying two properties, you are funding a business — then $731 a month of permanent, guaranteed cash flow is worth real money.

Amara and I have been repositioning our own portfolio toward monthly cash flow rather than raw equity for a couple of years now, so I will admit some bias. But bias is not advice. Run both columns.

Who cannot recast

FHA, VA, and USDA loans. Government-backed programs do not permit re-amortization. If you want a lower payment on one of those, your path is a streamline — I covered both in FHA streamline and VA IRRRL in San Diego.
Some jumbo and portfolio loans. Above San Diego’s conforming limit, the answer lives in your specific note and your servicer’s policy. Ask before you plan.
Loans that were modified. Servicers routinely exclude previously modified loans.
Anyone who needs cash, not lower payments. A recast sends money in. If you need it to come out, that is a cash-out refinance conversation instead, and the rate math changes completely.

When a refinance still wins

I do not want to talk anybody out of a transaction that pencils. Refinancing beats recasting when:

Your current rate is above today’s market — if you closed in 2023 or 2024 in the high 6s or 7s, this whole article is the wrong one for you. Go run your refinance break-even.
You are paying mortgage insurance you could shed. Killing PMI often beats every other lever — see how to remove PMI in San Diego.
You need to pull equity out, restructure a second lien, or remove a borrower from the note.

Frequently asked questions

How much do I have to pay down to recast?

It is set by your servicer, not by law. Common minimums run $5,000 to $10,000, though some require more or a minimum percentage of the balance. Call the servicing number on your statement and ask two things: the minimum curtailment and the processing fee.

Does a recast shorten my loan term?

No. That is the whole design. Your payoff date stays exactly where it was and the payment drops instead. If you want the term to shrink, prepay and decline the recast.

Does recasting hurt my credit?

There is no new loan, no hard inquiry, and no new tradeline. Your balance drops, which if anything helps. It is one of the few moves in this business with no credit cost attached.

Can I recast more than once?

Many servicers allow it, sometimes with a limit over the life of the loan. Worth confirming if you expect a second windfall, because that changes whether you should deploy all of it now.

Let’s see which column wins for you

Send me your rate, your balance, your original closing date, and the size of the lump sum you are considering. I will build all four scenarios — do nothing, prepay, recast, refinance — side by side with real numbers, and tell you plainly which one I would take. Free, and frequently the answer is “call your servicer, not me.”

Get your free equity and payment review

Ron Berg

I am a San Diego–based mortgage lender licensed in California, Nevada, Arizona, and Maryland. I spend most of my week on the unglamorous question of whether a transaction is actually worth doing. Find me on Instagram or Facebook, or run your equity review here.

Ron Berg, NMLS #974839. C2 Financial Corporation, NMLS #135622, CA DRE #01821025. Licensed in CA, NV, AZ, and MD. Recast availability, minimum curtailments, and fees are set by your loan servicer and by investor guidelines, and are subject to change — confirm yours directly. Rates and payments shown are illustrative and based on the Freddie Mac Primary Mortgage Market Survey average of 6.66% as of 8/27/2026; they are not a quote, a commitment to lend, or an offer of credit. This is not tax or investment advice. Equal Housing Opportunity.

September 2, 2026

Buying a House in San Diego This Fall: The Window Most Buyers Miss

Key takeaways

Freddie Mac’s 30-year fixed averaged 6.66% for the week ending August 27, 2026 — up a hair from 6.65%, and about a tenth of a point above where it sat a year ago.
San Diego’s median sale price is around $960,000, down roughly 1.5% year over year, with homes selling near 99% of list.
The buyers competing with you in September are a fraction of the buyers competing with you in April. That is the entire fall advantage.
Waiting for a Fed cut to land at, say, 6.25% next spring on a 3% higher price saves about $65 a month — and costs you roughly $5,800 more in down payment.
The Fed does not set mortgage rates. It sets an overnight bank rate. Long-term mortgage pricing follows the bond market, which moves on expectations before the Fed ever votes.

If you are buying a house in San Diego this fall, the advantage you have is not the rate. It is the calendar. Between Labor Day and the holidays, the buyer pool thins out dramatically while a summer’s worth of unsold listings is still sitting there with increasingly patient sellers attached to them.

That is the trade. Spring gives you selection and competition. Fall gives you less selection and almost no competition. In a year where San Diego prices have drifted slightly down instead of up, the second deal is the better one for most people.

Who this is actually for

This is for the San Diego buyer who has been circling since spring — the couple who lost two offers in Clairemont in April and quietly stopped looking in June, the family that has outgrown a condo in North Park, the first-timer who has been saving and watching and waiting for a signal.

I know the feeling underneath it, because I hear it on the phone every week: the fear of buying right before rates drop, immediately followed by the fear of waiting and getting priced out again. Those two fears cancel each other out and leave people frozen for years. Let’s replace both of them with arithmetic.

What the San Diego market actually looks like right now

The median sale price in San Diego is hovering around $960,000, down about 1.5% from a year ago. Homes are taking roughly a month to go pending and closing near 99% of asking. Inventory has been climbing all year and is near its highest level since 2020.

None of that describes a crash. It describes something more useful to you: a market where sellers no longer assume five offers by Sunday. A listing that went up in June and is still up in September has a seller who has already had one uncomfortable conversation with their agent. That seller negotiates. The June version of that seller did not.

On financing, Freddie Mac’s Primary Mortgage Market Survey put the 30-year fixed national average at 6.66% for the week ending August 27, 2026, up from 6.65% the prior week. A year ago it averaged 6.56%. Rates have been remarkably boring for months, which is its own kind of information.

The question I get every single week: should I wait for the Fed?

The Federal Open Market Committee meets again September 15–16, 2026. The federal funds rate has been sitting in the 3.50%–3.75% range since December 2025, and the Fed has not cut this year. You can watch the schedule yourself on the Fed’s own FOMC calendar.

Here is the part almost nobody explains properly. The Fed does not set your mortgage rate. It sets the overnight rate banks charge each other. Your 30-year fixed is priced off mortgage-backed securities, which track the 10-year Treasury, which moves on what investors expect inflation and Fed policy to do — often weeks or months before a meeting happens.

That is why mortgage rates sometimes go up on the day the Fed cuts. The cut was already priced in; the press conference contained a surprise. If you are waiting for a specific meeting to hand you a lower rate, you are waiting on a mechanism that does not work the way it sounds like it works.

The waiting math, in dollars

Let’s be generous to the waiting argument. Say you skip this fall, and by next spring rates really have come down to 6.25% — and San Diego prices are only 3% higher, which would be modest for a spring with cheaper money.

	Buy this fall	Wait until spring
Purchase price	$960,000	$988,800
20% down payment	$192,000	$197,760
Loan amount	$768,000	$791,040
Rate	6.66%	6.25%
Monthly principal & interest	$4,935	$4,871

Illustrative only, using the Freddie Mac national average for the week ending August 27, 2026. Principal and interest only — excludes taxes, insurance, HOA and Mello-Roos. Not a quote or offer.

Waiting buys you $65 a month. It costs you $5,760 more in cash at closing, roughly seven months of rent paid to somebody else, and a spring market where you are bidding against every other buyer who also waited for the cut.

Lower rates do not arrive alone. They arrive with the buyers who were waiting for them. That is why “wait for rates” and “pay less for the house” are usually opposite strategies.

And if rates fall further than that? You refinance. You are marrying the house and dating the rate — a cliche because it is true. Just run the break-even math before you pay for one, rather than refinancing on reflex.

Where fall leverage actually shows up

The real prize in a fall San Diego purchase is not the sticker price. It is what you can ask a motivated seller to pay for.

On a $960,000 home, a 3% seller concession is $28,800. Taken as a price reduction, that trims your payment by about $185 a month. Aimed at your rate instead, the same money moves the payment considerably harder — I broke that comparison down in detail in rate buydown vs. price reduction in San Diego. Concessions like that are rare in a spring bidding war and genuinely available on a house that has been listed since June.

Three more fall-specific advantages worth knowing:

Vendors have capacity. Inspectors, appraisers, and contractors are less slammed in October than in May. Your escrow moves faster and your inspection report arrives on time.
You see the house honestly. Fall and early winter are when San Diego homes reveal their drainage, their roof, and how a west-facing living room behaves at 4 p.m. A June walkthrough hides all of it.
Sellers on a deadline are real. Job relocations, school-year timing, and estate situations do not pause for market conditions. Those sellers are disproportionately represented in the fall pool.

What to do in the next two weeks

If you want to be in position before the fall listings start getting reduced, the sequence is simple and it is not long:

Get a real pre-approval, not a calculator estimate. A fully documented pre-approval is what separates a serious offer from a hopeful one — and it tells you your actual number instead of a guess.
Know your down payment options. You almost certainly do not need 20%. There are far more down payment paths in San Diego than most buyers realize, including some with nothing down.
Set your payment ceiling, not your price ceiling. Price is vanity; the payment is what you live with. Work out how much house you can actually afford including taxes, insurance, and HOA.
Watch the days-on-market column. Anything listed before July 4 that is still active is your negotiation list.

Frequently asked questions

Is fall really a better time to buy in San Diego?

For competition and negotiating room, generally yes. For selection, no — fewer homes come to market after Labor Day. If you need a very specific home in a very specific pocket, spring may still serve you better. If you mostly need a good deal on a good house, fall is the friendlier season.

Will mortgage rates go down after the September Fed meeting?

Nobody knows, including me, and anyone who tells you otherwise is selling something. What I can tell you is the mechanism: mortgage rates move on inflation data and bond-market expectations, not on the Fed’s announcement itself. The CPI and PCE reports between now and mid-September will do more to move your rate than the meeting will.

Should I wait until after the holidays instead?

Late December and early January are the quietest weeks of the San Diego year, and the handful of sellers still listed then are often the most motivated of all. The tradeoff is that inventory is at its thinnest. It is a fine plan if you are patient and flexible on the home itself.

What if prices keep falling after I buy?

It is a real risk and it deserves a straight answer. Nobody times the bottom. What protects you is holding period and payment comfort — if you plan to stay seven or more years and the payment fits without straining, short-term price movement is noise. If you might sell in two years, that is a genuine reason to wait, and I will tell you so.

Find out what your fall number actually is.

Every figure above is built on a national average and a median price. Yours will be different — your credit, your down payment, your property type, and the day you lock all move the answer. If you want to be ready to write on a reduced listing this fall, get pre-approved now and know your ceiling before you fall in love with a house.

Start My Pre-Approval

Ron Berg — The Berg Group, powered by C2 Financial. I help buyers in California, Nevada, Arizona, and Maryland figure out what the payment actually looks like before they fall in love with the house.

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Rates referenced are national averages published by Freddie Mac’s Primary Mortgage Market Survey and are not an offer, quote, or commitment to lend. Future rate and price scenarios are illustrations for comparison, not forecasts. Payment examples show principal and interest only and exclude taxes, insurance, HOA dues, and Mello-Roos. Market figures are as of late August 2026 and change. Ron Berg NMLS #974839 · C2 Financial Corporation NMLS #135622 · CA DRE #01821025. Equal Housing Opportunity.

September 1, 2026

Author: AmaraBerg

Who this is for

The belief that causes the most trouble

The 25% ownership line

What “adequate business liquidity” actually means

Guaranteed payments, losses, and the second year

The tension nobody enjoys naming

When to skip all of this

Frequently asked questions

Can a client use K-1 income if the business never distributed cash?

Does a K-1 loss always reduce qualifying income?

My client owns exactly 25%. Which side of the line is that?

How far back will a lender look?

What is the single most useful thing I can send with a client referral?

Related reading on this site

Let’s build a referral process that works both directions

Who this is for

The five late-stage deal killers in San Diego

1. The buyer’s credit or debt changed after the pre-approval letter

2. The appraisal comes in under contract price

3. Insurance

4. The HOA or condo documents

5. The final walkthrough

The early-warning table

One thing not to do

What to actually ask your lender

Frequently asked questions

Is 14.8% actually high, or does it just sound high?

Can I stop a buyer from opening new credit during escrow?

What is the single highest-leverage change for a listing agent?

Where do rates sit right now?

Want the weekly loan-status call built into your listings?

The short version

Who this guide is for

Step 1: Understand what the 2026 market actually is

Step 2: Get your financing sorted before you look at houses

Step 3: Work out what you can actually carry

Step 4: Figure out the down payment

Step 5: Decide what you are actually buying

Step 6: Write the offer

Step 7: Get through escrow without creating your own problems

The realistic timeline

When NOT to buy right now

Frequently asked

The order, one more time

Start with the number, not the listing

Key takeaways

Who this is for

Why the 1098 is not the answer

The four destinations

The timing trap

Where this shows up in the current market

The four questions to ask the client

When tracing is not the issue at all

Frequently asked questions

Is interest on a cash-out refinance deductible?

Does a home equity line of credit follow the same rules?

Can one loan produce interest on more than one schedule?

How does this affect what a client can borrow?

What I would do this quarter

Have a client’s refinance you want walked through before year-end?

Key takeaways

Who this is for

What “no closing cost” actually means

The three paths on a $600,000 San Diego refinance

The question that actually decides it

How to compare offers honestly

When a no-closing-cost refinance is the wrong move

Frequently asked questions

Is a no-closing-cost refinance really free?

How much higher is the rate on a no-closing-cost refinance?

Can I do a no-closing-cost refinance more than once?

Do lender credits affect how much I can borrow?

What I would do this month

Want to see both versions of your refinance side by side?

Key takeaways

Who this is for

What actually changed on August 3, 2026

The 2027 reserve rule you should ask about today

The six documents to get before you write an offer