California Mortgage Rates

Living in California

When it comes to lifestyle options, few states do it like California, the most populated state in the country. Famous for its Mediterranean-like climate, the state also offers desert, mountain and coastal living, as well as a relaxed vibe even in urban draws like Los Angeles and San Francisco.

California’s housing market is as diverse as its landscape. Statewide, the median price for a single-family home was $602,920 in April, up 3.2% from the year before, according to the California Association of Realtors. However, in the San Francisco Bay Area prices dropped 2.2%, while they rose 4.2% in the Los Angeles metro area and 5.7% along California’s central coast.

Lately, lower interest rates have helped home sales in California, but higher prices and growing unaffordability have caused the market to soften in favor of buyers. Sales of existing homes across the state were down 4.8% in April, while the sales-price-to-list-price ratio was 98.9% compared to 100% the year before. Meanwhile, the median time on the market for a California home was 21 days, versus 15 days the year before. These numbers suggest buyers in California may now have more options and more time to pick the home and price that works best for them.

The rules and costs of buying a home in California

California has strong consumer protection laws in place, and that protection extends to homebuyers.

Home seller and buyer laws

Sellers in California are required by law to provide buyers with a real estate transfer disclosure statement that documents any defects, potential hazards and modifications that may affect the value of the home or are subject to pending lawsuits or not in compliance with building codes. A local real estate broker can most likely provide you with a copy of the statement.

By law in California, sellers must also disclose if their home is near an airport, in an area of potential flooding or in an earthquake fault zone.

When it comes to foreclosing on a home, California allows both non-judicial and judicial foreclosures. Judicial foreclosures mandate that a lender go to court in order to foreclose. In California, non-judicial foreclosures are more common, and they basically mandate that a lender must first work with a delinquent borrower to draw up a payment plan before filing notice to sell the home at a public auction. If a lender decides to do a non-judicial foreclosure, they give up the right to sue the borrower for the balance of the mortgage if the home should sell for less than the balance owed.

Like some other states, California is a community property state. This means all property acquired during a marriage — including any real estate property — must be split equally in the event of a divorce or annulment, regardless of the circumstances or whose name is on the title.

It’s important to know whether you are buying a home in a community property state, or a state with so-called equitable distribution, where a judge typically divides assets by weighing factors such as individual incomes. For example, if you plan on taking out a loan in a community property state, you may be required to include your spouse’s debt when your mortgage is under review for financing, even if the spouse is not on the loan for qualifying purposes.

In California, buyers and sellers are not required by law to hire lawyers to handle and close a real estate transaction. Instead, California is an escrow state, which means real estate transactions can be handled by licensed escrow companies, licensed real estate brokers and representatives of title companies.

Taxes

In California, the typical property tax bill includes a variety of charges that can seem complicated. In 1978, the state established a 1% tax rate that is based on the value of your home, but most municipalities have additional property taxes that pay for voter-approved local infrastructure projects, such as updating school buildings.

The state does offer a few property tax exemptions. For example, some owner-occupied homes may benefit from a $7,000 reduction in the taxable value of the home. Meanwhile, disabled veterans who qualify may receive an exemption that lowers their property values by $100,000. That number is compounded by inflation, so in 2018 it was $134,706.

According to Tax-Rates.org, the median property tax for California is now $2,839, based on a median home value of $384,200, but the exact rate depends on where you live. Marin County, for example, currently has the highest property taxes in the state, averaging at $5,500 annually, while Modoc County has the lowest, with an average of just $953.

Whenever real estate is sold, either the buyer or seller (or both) usually needs to pay a property transfer tax, also known in California as a documentary transfer tax, which covers the cost of transferring the deed. In California, both cities and counties typically charge property transfer taxes. In most areas, the total city and county tax is $1.10 per $1,000 of property value. However, some California cities charge significantly more than others, upping the total property tax bill. For example, in Alameda County, homeowners in both Berkeley and Oakland may pay a total $16.1 per $1,000 of home value.

Conforming loan limits

Conforming loan limits are the maximum amounts that can be loaned for mortgages that are acquired by Freddie Mac and Fannie Mae, two government-sponsored entities that help bring both stability and liquidity to the overall mortgage market. For consumers who have good credit, conforming loans usually offer the best interest rates.

In the U.S., the conforming loan limit for a single-family home is now $484,350, but there are allowances for higher-cost areas. For these areas, the limits will be set based on the median home value, up to a maximum of $726,525. Ten California counties now have conforming loan limits at the $726,525 maximum.

Programs for homebuyers in California

Given the high cost of homes in many areas of California, the state offers several programs to help homebuyers afford conventional loans, government-sponsored loans and down payment costs. You’ll see more details below:

CalHFA Conventional Loan

This program offers a 30-year, fixed-rate program for homebuyers, and it can be combined with CalHFA’s down payment assistance programs.

Who qualifies:

  • For new homebuyers, at least one borrower must complete a homebuyer education course
  • Borrowers must meet income limits, which vary by county
  • Property being purchased must cost $765,000 or less

Learn more

CalPlus Conventional Loan

This program offers a 30-year, fixed-interest-rate program for homebuyers to be used with the CalHFA Conventional Zero Interest Program (ZIP). The ZIP loan can be used to cover closing costs up to 2% or 3% of the mortgage.

Who qualifies:

  • Must be a first-time homebuyer, unless you have been impacted by a California natural disaster
  • Borrowers must complete a homebuyer education course
  • The home must be the borrower’s primary residence
  • Borrowers must meet income limits, which vary by county
  • Property being purchased must cost $765,000 or less

Learn more

CalHFA FHA Program

The CalHFA FHA Program offers FHA-insured, 30-year, fixed-interest-rate mortgages, which can be combined with the state’s down payment assistance programs.

Who qualifies:

  • If first-time homebuyers, at least one borrower must complete a homebuyer education course
  • Borrowers must meet income limits, which vary by county
  • Property being purchased must cost $765,000 or less

Learn more

CalPlus FHA Program

The CalPlus FHA program offers a 30-year, fixed-interest-rate, FHA-insured mortgage together with a Zero Interest Program (ZIP) loan for closing costs. The ZIP loan can be for 2% or 3% of the total loan amount.

Who qualifies:

  • Borrowers must be first-time homebuyers
  • Borrowers must complete a homebuyer education course
  • Borrowers must meet income limits, which vary by county
  • Property being purchased must cost $765,000 or less

Learn more

CalHFA Energy Efficient Mortgage (Cal-EEM + Grant)

This program provides funds for improving your new home’s energy efficiency. The EEM grant is for up to 4% of the mortgage loan amount. Making your home energy efficient can lead to lower utility costs, leaving you more money for mortgage payments.

Who qualifies:

  • Borrowers must complete CalHFA’s homebuyer education course if this is their first home
  • Borrowers don’t have to be first-time homebuyers
  • Borrowers must meet the CalHFA income limits, which vary by county
  • The property being purchased must cost $765,000 or less

Learn more

CalHFA VA Program

This 30-year, fixed-interest rate mortgage is backed by the U.S. Department of Veterans Affairs and can be combined with down payment programs.

Who qualifies:

  • Borrowers must have a valid Certificate of Eligibility from the VA
  • For first-time homebuyers, at least one borrower must complete a homebuyer education course
  • Borrowers must meet income limits, which vary by county
  • Property being purchased must cost $765,000 or less

Learn more

MyHome Assistance Program

This is a deferred-payment loan to help with your down payment or closing costs. The loan provides up to 3.5% of the purchase price or appraised value (whichever is less). It may only be used with a CalHFA first mortgage. Repayment is not due until the property is sold or refinanced.

Who qualifies:

  • Borrowers must be first-time homebuyers unless buying a home in an area affected by a natural disaster
  • Borrowers must complete CalHFA’s homebuyer education course if this is their first home
  • Borrowers must meet CalHFA income limits, which vary by county
  • The property being purchased must cost $765,000 or less

Learn more

School Teacher and Employee Assistance Program

This program is for virtually any public school employee who is a first-time borrower. The loans are for up to 4% of the purchase price and must be combined with a CalHFA mortgage.

Who qualifies:

  • Borrowers must be currently employed by a California public school district
  • Borrowers must be first-time homebuyers
  • Borrowers must complete CalHFA’s homebuyer education course if this is their first home
  • Borrowers must meet CalHFA income limits, which vary by county
  • The property being purchased must cost $765,000 or less.

Learn more

Rate shopping tips

As in most states, California mortgage interest rates will vary by lender, so it pays to shop around. Even a small difference can save you thousands over the life of your loan. Here are a few more things to keep in mind:

Contact at least three lenders on the same day

Mortgage rates fluctuate daily, so you’ll have the best chance of making an accurate comparison if you contact all potential lenders on the same day.

Give each lender the same information

To make an accurate comparison, ask each lender for a quote on the same type of mortgage. For example, you may want to compare 30-year, fixed-rate mortgages. Be consistent about the information you give them about yourself, too, such as your income and debt payments. You may want to allow them to check your credit to ensure you get an accurate quote.

Add up all the lender fees to confirm the costs

To get an accurate idea of the total costs of each loan, start by looking beyond the interest rate and ask instead for the annual percentage rate (APR). An APR typically includes other costs, such as loan origination fees, mortgage insurance, most closing costs, as well as the cost of any discount points you may be willing to take on in exchange for a lower interest rate. You can also get a good idea of what your total loan will cost by reviewing the loan estimate your lender is obligated to give you. It will list up-front loan costs and may also indicate whether you are eligible for any lender credits that could lower your overall costs.

Know when to lock in the rate

Some lenders may be willing to lock in your interest rate when they issue your loan estimate, and the first page of your estimate will indicate whether your rate is locked should interest rates go up. If not, ask the lender about their rate-lock policies and whether there are additional fees to lock in your rate before you actually close on your purchase. Most lock-in periods range from 30 to 90 days, although some lenders may be willing to offer more time. Some also offer a “float down” option to protect your rate in case rates drop.

Ask about local programs

Real estate markets in California vary, and some cities and counties offer incentives if you buy in a particular area or if you meet certain income levels. Ask your real estate agent about any local buyer incentives, which could lower your costs even more.

The rates and fees mentioned in this article are accurate as of the date of publishing.