Buying a Home in CaliforniaBefore you buy a home in California, you’ll likely need a whole lot of money. Of course, the Golden State has some less-expensive areas. But few could be classified as ‘cheap.’ When buying a home in the state, watch out for:
- “Community facilities districts” — If you buy a home in an area with this designation, you’ll likely pay an additional property tax, called “Mello-Roos taxes”
- Dual agencies — It’s legal for your real estate agent to act for both you and the seller, which can lead to conflicts of interest
- Extensive written disclosures from the seller — California law obliges sellers to disclose many more defects and issues than most other states. This is a good thing. So read them all!
- Community property — As a community property state, California law assumes “all property acquired during the marriage is owned equally by both spouses,” according to LegalZoom.com
Refinancing in CaliforniaThe market value of your home will help determine whether you can refinance at all. If you do a cash-out refinance, your home’s value will also affect how much cash you can take out. So California homeowners who wish to refinance should track home prices in their state and area. Also, check your current mortgage balance. If your home’s value has risen and you’ve paid off some of your mortgage, you might have at least 20% equity. This could make you eligible to cancel private mortgage insurance (PMI) or FHA mortgage insurance, and lower your monthly mortgage payments. Expect wide home price variations across the state. California has so many people employed in so many (very different) industries, it’s bound to have geographical areas that are doing badly while others are doing well. Because of these variations, statewide home price figures may not be helpful. Instead, research prices in your neighborhood and your city or county. You can find this information online. But you’ll probably get a more accurate idea by checking public records for recent sales. You could also ask your real estate agent, who probably does this kind of local price analysis all the time. If all you want is a lower refinance rate, a shorter term, or to refinance from an adjustable-rate mortgage to a fixed-rate mortgage, the value of your home may be less important. Though it will sometimes still play a part in determining your eligibility, loan amount, and loan program.
Mortgage calculator: CaliforniaCalculate your mortgage loan payment for a home in California. Start by finding your current mortgage rate using the filters above. Then enter your rate, home price, down payment, and loan term into the mortgage calculator below to estimate your monthly payment.
Reverse mortgages in CaliforniaThe California Department of Real Estate (DRE) has some good advice about reverse mortgages for California residents. It says, "Shop around and compare offerings. Not all reverse mortgages are the same; their terms vary substantially." The DRE says you can contact a counselor and/or find HUD-approved reverse mortgage lenders in California at: (800) 569-4287. Reverse mortgages are only available to California residents who own their homes. A reverse mortgage — also called a "Home Equity Conversion Mortgage" or HECM — lets you tap your home’s cash value without a monthly mortgage payment. The loan is repaid when the house is eventually sold or inherited. If you’re looking for extra income in retirement, the DRE continues, "Decide if you really need a reverse mortgage. Another type of loan may be a less costly solution. Discuss this with a counselor."
Finding the best California mortgage ratesAverage mortgage rates repeatedly set new record lows in 2020. When current rates are low, it’s an ideal time for home buying or refinancing. But you should still shop around with at least three different mortgage lenders. Some lenders specialize in certain loan types and can offer lower rates than others. As you compare rates, remember that mortgages are also highly customized to each individual borrower. Your interest rate will reflect your credit profile, down payment size, loan type, and loan term. To get a better idea of your rate, ask your loan officer or a customer service rep at a lender to start a pre-approval process.
Mortgage loan types for California homebuyersWhether you’re buying in San Diego or Los Angeles, San Jose, Sacramento, or Redding, your mortgage broker or loan officer will likely offer one of the following loan types:
- Conventional loans: The nation’s ‘standard’ mortgage conforming to Freddie Mac and Fannie Mae’s loan limits. Home buyers need at least a 3% down payment and a credit score of 620 or higher
- Jumbo loans: Home buyers in high-value markets like San Francisco or Los Angeles may need a jumbo loan whose value exceeds Freddie Mac and Fannie Mae conforming guidelines. Jumbo loans typically require a credit score of 680-700 or higher
- FHA loans: These loans, insured by the Federal Housing Administration, offer competitive rates even for home buyers who have only fair credit. Buyers need to put at least 3.5% down. FHA mortgages have lower loan limits than conventional loans, and may not be available in many of California’s high-priced markets
- USDA loans: Backed by the U.S. Department of Agriculture, these loans can help buyers in rural areas of California get a home with no down payment. You’ll need lower- to moderate income to qualify
- VA mortgages: Veterans and active-duty Californians can borrow with no money down and no ongoing mortgage insurance premiums. VA loans also have especially low interest rates
- Cash-out refinance: Replaces your current mortgage with a larger loan amount so you can tap your home equity. You can use the funds for home repairs, debt consolidation, or any other purpose. At the same time, in today’s low interest rate climate, you might be able to borrow at a lower rate
- Rate and term refinance: Rolls your current mortgage balance into a new loan with a lower interest rate. Your lower-rate loan could also offer a shorter loan term, saving even more on interest
- Home equity loans: Borrows against your existing home equity without replacing your current mortgage
- HELOCs: Home equity lines of credit use your home equity to fund a credit line you can pull from and repay over time
California mortgage companiesAccording to customer reviews on Zillow, the top-rated California mortgage companies are all smaller or local. At the top of the list with five-star ratings are: LendUS, MortgageTree Lending, Mares Mortgage, MMC Lending, and Sharp Loan. But the five biggest California mortgage companies are all major lenders: Wells Fargo, Bank of America, Quicken Loans, Chase Bank, and Citibank, according to Value Penguin. To learn more about these companies, see our mortgage lender reviews:
- The Best Mortgage Companies for 2022
- The Best Refinance Companies for 2022
- Individual Mortgage Lender Reviews