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Home Mortgage Rates in California

San Diego Sunset.

Palm trees, beaches and more than 300 sunny days per year on average - who wouldn’t want to live in the Golden State? And that’s precisely the problem. Demand for homes in California has soared; consequently the prices – and therefore the mortgages – reflect that.

Young couples just starting out are struggling to come up with the sizeable funds needed for a down payment, but once they’ve overcome that hurdle they must negotiate the minefield of rules and regulations governing California mortgage rates and loans. They needn’t feel too badly - the types of loan on offer can confuse even a seasoned home owner looking to refinance or simply move to another house.

It would be pointless for this article to focus specifically on current rates for mortgages in California. They are, after all, changing constantly – sometimes several times a day as the market fluctuates. So any information printed here could be out of date within hours. Nevertheless, there are general trends that govern the housing market and California mortgage rates as well as those in other states - so looking at the national picture can be revealing. Here’s what you need to know.

California Real Estate Prices vs Median Nationwide Prices

It should be no surprise to anyone that homes in California are priced much, much higher than comparable properties in other states. A two-bedroom house in Los Angeles proper may cost up to three times as much as a similar home in say, Austin, Texas. Respected real estate website Trulia.com has drawn up a “heat map” of America, grading each state’s average listing price on a temperature scale, ranging from “hottest” (most expensive) to “coolest” (least expensive).

Downtown Los Angeles with Mount Baldy.

California, along with New York, New Jersey, Connecticut and a few other states, are all colored the brightest shade of red, indicating a sweltering average home price of $449,000 or above. Neighboring Nevada and nearby New Mexico, among others, come in at a distinctly warm orange, with values at a still steep $353,000 to $401,000. For the most bang for your buck, head to North Dakota, Iowa, Indiana or Ohio. Trulia.com has rated these areas a cool deep green to indicate the average house price is just $192,000 or less.

Popular cities to live in, in the state of California, and the fastest growing cities

We’ve just seen that Trulia.com has determined the average Californian home listing as $449,000, but residents of the Golden State know that hardly tells the whole story. Try buying a house in Beverly Hills for that. The truth is that prices vary wildly depending on where the property is located. Nowhere is that more apparent than the most populated cities. In fact, eight of the 50th most populous cities in America are located in California, which itself is the nation’s most populated state.

Venice Canal Historic District.

Los Angeles tops the list as California’s number one most populated city, and it is also the second most populous city in the whole of America, second only to New York. A little more than four million people call LA home according to estimates made by the California Department of Finance in January 2009, while there are more than a million people living in San Diego and San Jose respectively. San Francisco, Sacramento and Santa Ana also made it into the top dozen most populated Californian cities.

Downtown San Jose, California.

Even though these cities are among the most densely populous areas in the country, they are still growing. In 2008, the US Census Bureau announced that New Orleans, Louisiana, was the fastest growing city in the nation, but the Californian cities of Roseville and Irvine came in at sixth and seventh respectively. It’s impossible for such studies of family migration patterns to ascertain why people are moving to those particular cities, but factors such as affordability of housing and a strong local economy or job market likely have something to do with it. One thing is for sure: The popularity of California and increased demand for housing as the population rises won’t do anything to lower real estate prices.

Portrero Hill in San Francisco.

Most Populous Cities

The following table highlights the July 1, 2015 estimated populations of the most populous cities in the state by the United States Census Bureau.

Rank City Population County
1 Los Angeles 3,971,883 Los Angeles
2 San Diego 1,394,928 San Diego
3 San Jose 1,026,908 Santa Clara
4 San Francisco 864,816 San Francisco
5 Fresno 520,052 Fresno
6 Sacramento 490,712 Sacramento
7 Long Beach 474,140 Los Angeles
8 Oakland 419,267 Alameda
9 Bakersfield 373,640 Kern
10 Anaheim 350,742 Orange
11 Santa Ana 334,909 Orange
12 Riverside 322,424 Riverside
13 Stockton 305,658 San Joaquin
14 Chula Vista 265,757 San Diego
15 Irvine 256,927 Orange
16 Fremont 232,206 Alameda
17 San Bernardino 216,108 San Bernardino
18 Modesto 211,266 Stanislaus
19 Fontana 207,460 San Bernardino
20 Oxnard 207,254 Ventura
21 Moreno Valley 204,198 Riverside
22 Huntington Beach 201,899 Orange
23 Glendale 201,020 Los Angeles
24 Santa Clarita 182,371 Los Angeles
25 Oceanside 175,691 San Diego
26 Garden Grove 175,393 Orange
27 Rancho Cucamonga 175,236 San Bernardino
28 Santa Rosa 175,000 Sonoma
29 Ontario 171,214 San Bernardino
30 Elk Grove 166,913 Sacramento
31 Corona 164,226 Riverside
32 Lancaster 161,103 Los Angeles
33 Palmdale 158,351 Los Angeles
34 Hayward 158,289 Alameda
35 Salinas 157,380 Monterey
36 Pomona 153,266 Los Angeles
37 Sunnyvale 151,754 Santa Clara
38 Escondido 151,451 San Diego
39 Torrance 148,475 Los Angeles
40 Pasadena 142,250 Los Angeles
41 Orange 140,992 Orange
42 Fullerton 140,847 Orange
43 Roseville 130,269 Placer
44 Visalia 130,104 Tulare
45 Thousand Oaks 129,339 Ventura
46 Simi Valley 126,788 Ventura
47 Concord 128,667 Contra Costa
48 Santa Clara 126,215 Santa Clara
49 Victorville 122,225 San Bernardino
50 Vallejo 121,253 Solano
51 Berkeley 120,972 Alameda
52 El Monte 116,732 Los Angeles
53 Downey 114,219 Los Angeles
54 Carlsbad 113,453 San Diego
55 Costa Mesa 113,204 Orange
56 Fairfield 112,970 Solano
57 Temecula 112,011 Riverside
58 Inglewood 111,666 Los Angeles
59 Antioch 110,542 Contra Costa
60 Murrieta 109,830 Riverside
61 Richmond 109,708 Contra Costa
62 Ventura 109,708 Ventura
63 West Covina 108,484 Los Angeles
64 Norwalk 107,140 Los Angeles
65 Daly City 106,562 San Mateo
66 Burbank 105,319 Los Angeles
67 Santa Maria 105,093 Santa Barbara
68 Clovis 104,180 Fresno
69 El Cajon 103,679 San Diego
70 San Mateo 103,536 San Mateo
71 Rialto 103,132 San Bernardino
72 Vista 100,890 San Diego
73 Jurupa Valley 100,314 Riverside
74 Compton 98,462 Los Angeles
75 Mission Viejo 97,156 Orange
76 Vacaville 96,803 Solano
77 South Gate 96,401 Los Angeles
78 Hesperia 93,295 San Bernardino
79 Carson 93,281 Los Angeles
80 Santa Monica 93,220 Los Angeles
81 San Marcos 92,931 San Diego
82 Westminster 92,114 Orange
83 Santa Barbara 91,842 Santa Barbara
84 Redding 91,582 Shasta
85 San Leandro 90,712 Alameda
86 Chico 90,316 Butte
87 Hawthorne 88,451 Los Angeles
88 Livermore 88,126 Alameda
89 Indio 87,533 Riverside
90 Whittier 87,438 Los Angeles
91 Menifee 87,174 Riverside
92 Newport Beach 87,127 Orange
93 Tracy 87,075 San Joaquin
94 Citrus Heights 87,056 Sacramento
95 Chino 85,595 San Bernardino
96 Alhambra 85,551 Los Angeles
97 Redwood City 85,288 San Mateo
98 Hemet 83,861 Riverside
99 Buena Park 83,270 Orange
100 Lake Forest 82,492 Orange

Space Shuttle Endeavour Flying Over Sacramento.

Types of Mortgages Offered in California

Trying to buy a house varies from state to state. For example, citizens of Georgia have “security deeds” instead of “mortgages”, and those documents have one key difference. While mortgages allow the borrowers to own the legal title of the property (despite the lender’s stake in it), a security deed gives the legal title to the mortgage provider. The foreclosure process for security deeds is consequently much faster than it is for mortgaged properties.

Similarly, the majority of “mortgages” in California are officially named “deeds of trust”. Deeds of trust are pretty much “mortgages” with a different name, but again, they allow the foreclosure process to be speeded up should the borrower default. Wannabe homeowners (or current homeowners looking to refinance) in California can apply for two types of mortgage, although there is also a third option that may be available to them:

Conventional loans

This method of borrowing does exactly what it says on the tin. The loans may have to be paid back within 15 or 30 years, depending on your preference. You must also choose whether to go for a fixed interest rate (ie. the amount you pay back each month will never change) or an adjustable interest rate (ARM), where the amount you pay will change over time. The homeowner stands to benefit if the interest falls, but of course, if they rise, as happened during the credit crisis, things could get ugly. If borrowers decide to go for a fixed loan, they must always remember that a rate is never guaranteed until they “lock” into one particular deal. Borrowers may choose to buy a “point” up front (one point is equivalent to one percent of the amount of the loan) to reduce the interest rate, and therefore the monthly payment.

There’s one more thing you have to know: whether your loan is “recourse” or “non-recourse”. Non-recourse loans mean that if your home is foreclosed and sold, and the money raised by the sale is not enough to clear your debts, you won’t have to pay taxes on the amount you have failed to pay back. Recourse loans on the other hand, mean that the homeowner remains responsible for taxes on the debt left over after the repossession and sale of the foreclosed property. In California, home mortgages are usually considered non-recourse debt, although refinancing your home would most likely be considered a recourse debt.

Government loans

Various federal agencies may provide loans, such as the fixed or adjustable rate mortgages offered by the Federal Housing Administration (FHA) or the fixed rate mortgages offered by the Veterans Administration (VA).

Special initiatives

Californians with low (or even “moderate”) incomes may be able to qualify for special loans with various state and local housing departments – such as the California Housing Finance Agency (CalHFA), for example, which works with a list of approved lenders from the private sector.

How do California Mortgage Rates Compare Against National Averages?

The “mortgage rate” is the interest the borrower has to pay on the loan they have taken out. Mortgage rates are constantly in flux; they are affected by a myriad of factors and are impacted by the national and even the global economy. The interest rates on mortgages can vary dramatically across the country. Borrowers will be offered different rates in different states, and there will even be a difference in quotes offered by different lenders. Fees associated with the loans may also vary depending where you live.

Because California real estate is so much more expensive than properties in other states, many loans taken out are called “jumbo loans”. Jumbo loans are mortgages that exceed the amount standards set by the Federal agencies of Fannie Mae and Freddie Mac. Mortgages worth more than $417,000 in 2010 in California are considered jumbo loans. These mortgages usually have higher interest rates because there is an increased risk to the lender who made the loan.

The best way to make sure you are getting a good deal is compare mortgages with several different lenders. Don’t just take the rates into account; borrowers should compare other issues too, such as whether there will be penalties if the loan is paid off early. Other fees should also be taken under consideration, such as the closing costs.

The Foreclosure Process in California

If borrowers are unable to meet their loan payments, and default on their mortgage, the lender will begin the foreclosure process in an effort to get their money by repossessing the property. The borrower will be sent a notice of default, followed by a notice of trustee sale, which sets a date for the auction of the property. The winning bidder will have the title transferred to them. The lender sets the opening bid, so if no one bids higher than that amount then the property automatically remains the lender’s. In that case, the property will be sold to investors directly by the lender or bank as a real estate owned home (REO).