Disclaimer: PropStream does not offer investing advice or make profit promises. This article is for educational purposes only. We recommend consulting financial professionals and/or doing your due diligence before refinancing U.S. real estate or extending credit to borrowers.
|
Key Takeaways:
|
With fewer buyers taking out home loans, now can be a challenging time for lenders to do business. However, this doesn’t mean you must sit on the sidelines. As mortgage originations cool, refinancing may open new opportunities.
Table of Contents |
U.S. Mortgage Originations Are Down
In March 2021, the number of new U.S. home loans being issued soared to 1.48 million, the highest level since the Consumer Financial Protection Bureau (CFPB) started tracking this data.
Since then, mortgage originations have fallen significantly. By January 2023, they had dipped to a record low of about 250,000, roughly a sixth of their former peak. This coincides with the rapid increase in mortgage rates during the same period. From 2021 to 2023, the average 30-year fixed mortgage rate went from about 3% to 7%.
The same goes for the total dollar volume of home loans originated. It fell from $480 billion in January 2021 to $77 billion in January 2023. As of December 2024, it’s back up to $157 billion, and the number of mortgage originations has climbed to nearly 420,000.
Why Now May Be the Time to Focus on Refinancing
%20(1).png?width=1252&height=834&name=sold%20(6)%20(1).png)
Even though mortgage originations are increasing again, they’re still far below their recent peak and historical averages. As a lender, this can make it challenging to do business.
That’s why you may want to adapt your prospecting strategy. Instead of focusing on a historically small homebuyer pool, consider refinancing leads. These are existing homeowners who may be interested in replacing their current mortgage with another loan.
For example, if a homeowner has multiple open mortgages, they may be interested in consolidating them into one loan to take advantage of better loan terms and to lower their monthly payment.
Similarly, suppose a homeowner has high equity in their property. Then they may want to pull some out through a cash-out refinance to fund renovations, another property, or other expenses.
Of course, if a homeowner’s current mortgage rate is higher than today’s rates (e.g., because they bought a home in the fall of 2023 when rates were nearly 8%), they too may be interested in refinancing to lower their rate and monthly payment.
What Makes a Good Refinancing Lead?
In short, here’s what to look for in a refinancing lead:
- High home equity. Look for owners with enough equity that if they pulled some out, they’d still have enough invested in the property to serve as adequate collateral (e.g., no less than 30% equity).
- Multiple mortgages. Borrowers juggling multiple loans may be prime candidates for loan consolidation. One loan that replaces many can simplify their finances and lower their overall payment.
- High interest rates. Homeowners who locked in mortgage rates when they were high (e.g., above 8%) may be more motivated to refinance if rates have dropped since.
- Strong credit and stable income. No matter how a borrower performs on the above metrics, they should still have strong credit and stable income. Otherwise, they pose a higher risk of default.
Common Mistakes to Avoid
Before you start prospecting for refinancing leads, here are some common mistakes to avoid:
Assuming Everyone Wants to Refinance
Not all homeowners are eager to replace their current mortgage. For example, some may be deterred by prepayment penalties or simply feel financially secure with their current setup. Be quick to weed out uninterested leads to avoid wasting their and your time.
Focusing Only on Rate Reduction
While lower rates are compelling, it’s not the only reason borrowers might be interested in refinancing. Some may just want to pull out cash to fund a renovation or simplify their finances with a loan consolidation. Broaden your pitch to address different refinancing motivations.
Overlooking Creditworthiness
Don’t just look at a borrower’s equity. Check their credit history, debt-to-income ratio (DTI), and other markers of financial health. Otherwise, you might extend credit to someone unable or unwilling to repay the loan later.
Failing to Verify Loan Details
Carefully research a borrower’s existing loan details. Offering to refinance a loan without doing your due diligence can waste time, especially if the property has liens or unfavorable loan terms that make it ineligible for refinancing.
Use PropStream to Find Refinancing Leads
%20(1).png?width=1252&height=834&name=sold%20(7)%20(1).png)
At this point, you may be thinking, “Refinancing leads sound great, but how do I find them?”
The answer is, PropStream it!
Our real estate data platform lets you filter over 160 million properties nationwide by a host of mortgage and equity data points. You can filter homes by:
- Number of open mortgages
- Open mortgage remaining balance
- Mortgage recording date
- Loan types (conventional, FHA, VA, credit line, reverse mortgage)
- Total monthly payments
- Interest rate
- Interest rate type (adjustable rate, fixed rate, step interest rate, variable rate, other)
- Loan-to-value (LTV)
- Estimated equity %
- And more
For example, you could narrow in on loan consolidation opportunities by searching for properties with at least two mortgages. Alternatively, you could filter for properties with interest rates above 7% to identify rate reduction opportunities. The possibilities are endless.
