Compare Current Mortgage Rates in California

California has been home to some of the most expensive real estate markets for years and the demand for homes in the Golden State is not slowing down. Despite a staggering median home price of $840,360 and low inventory as of October 2023, homes in California are still selling quickly with only 15 days on the market. 

So what kind of mortgage is in store for you if you’re purchasing a home in California? Here is what you can expect:

Several factors affect mortgage rates. To start, the federal funds rate (the rate at which banks borrow money from each other) is set by the Federal Reserve. Mortgage interest rates represent a markup on the federal funds rate, so when the Fed raised interest rates in 2022 and 2023 to combat inflation, mortgage interest rates rose as well. 

While it might seem unrelated, mortgage interest rates are tethered to the condition of the bond market (specifically U.S. Treasury securities), as they must exceed the return of these securities to remain competitive.

Proposition 13, legislation passed in 1978, is a California-specific force on the real estate environment. This regulation dictates that a property’s assessed tax value can’t rise more than 2% per year until it is sold. This incentivizes homeowners to stay in their homes to secure a lower tax bill, creating a scarcity of homes available. 

While the demand for mortgages is high due to a strong economy in California, the lack of homes available, high prices, and high interest rates are making for a tight real estate market right now.

The California Housing Finance Agency (CalHFA) offers six varieties of first-time homebuyer loans. The first four are government-backed loans and require a 640 credit score. The last two are conventional loans and require a 660 credit score. Both allow a maximum debt-to-income ratio (DTI) of 50% and can be paired with the MyHome Assistance program to cover some of the down payment and/or closing costs.

1. CalHFA FHA loan: This loan is for homebuyers who want to occupy a single-family residence (condos and manufactured homes qualify). Borrowers must complete a homebuyer education course and have income at or below the appointed limits for the county where they live. This loan has a 30-year term and a fixed interest rate. It requires at least a 3.5% down payment. 
2. CalPlus FHA loan: The Plus version has similar qualification requirements to the CalHFA FHA loan (3.5% down payment, single-family home, homebuyer education course, and income below limits). However, it carries a slightly higher interest rate and is combined with the CalHFA Zero Interest Program (ZIP) for closing costs (up to 3% of the first mortgage). 
3. CalHFA VA loan: To qualify for a VA loan, you must present a certificate of eligibility (COE) as a qualifying veteran or a surviving spouse of a veteran. Like the CalHFA and CalPlus loans, this loan requires the borrower to live in the purchased single-unit home, take a homebuyer class, and have income below the limits. However, it does not require a down payment or private mortgage insurance (PMI).
4. CalHFA USDA loan: Only properties in a designated rural area qualify for USDA loans. (If you’re not sure if your home qualifies, you can check here.) The USDA also has an income limit table. Most of the time, USDA loans do not require a down payment.
5. CalHFA conventional loan: These loans require at least a 3% down payment. They have the same occupancy, education, and income requirements as the other CalHFA loans. Rather than being guaranteed by the FHA, conventional loans are insured with PMI.
6. CalPlus conventional loan: This loan has similar requirements to the CalHFA conventional loan, but it can be paired with CalHFA ZIP to help borrowers with closing costs.

While some factors, like the state of the economy, are outside of a homebuyer’s control, there’s a lot you can do to ensure that you get the best mortgage rate you can. Whether you live in Los Angeles, San Jose, San Diego, or anywhere in between, here are a few steps to start:

• Raise your credit score: The most competitive rates go to borrowers with the best scores. To raise your credit score, request a free credit report from one of the three credit bureaus (TransUnion, Equifax, or Experian) and dispute any errors you find. After that, pay your bills on time each month, ask your credit card company for a credit limit increase, or pay down credit cards that are getting close to your credit limit to increase your score.
• Increase your down payment: When you have more invested in the home with a large down payment, banks see your mortgage as less risky and may reward you with a lower interest rate. 
• Shorten your loan term: Mortgages come in more than the typical 30-year variety. A loan with a shorter repayment term often comes with a lower interest rate as well.
• Shop around: Lenders’ interest rates vary between borrowers and loan products, so it’s worth the time and paperwork to get pre-approved with several lenders. When you’re ready to make an offer on a house, you can pit the banks against one another to bid for your business.

There are several varieties of mortgages available in California, but here are some of the most common ones. The terms and rates will vary based on lender regulations and borrower qualifications.

Conventional

• Description: A typical mortgage issued by a bank or lender
• Min. credit score: 620
• Max. DTI: 45%
• Min. down payment: 3%
• PMI/MIP if less than 20% down?: PMI typically required
• Notes: There are loans with low down payments and no PMI, but they have higher interest rates

VA

• Description: Private mortgages guaranteed by the Department of Veterans Affairs
• Min. credit score: Varies by lender
• Max. DTI: 41%
• Min. down payment: 0%
• PMI/MIP if less than 20% down?: No
• Notes: For qualifying veterans and surviving spouses only

USDA

• Description: For low- to middle-income borrowers in designated rural areas
• Min. credit score: 640
• Max. DTI: 41%
• Min. down payment: 0% to 3.25%
• PMI/MIP if less than 20% down?: No PMI; annual fee instead
• Notes: Fees are typically folded into the homeowner’s monthly payments

FHA

• Description: Mortgages insured by the Federal Housing Administration
• Min. credit score: 580 for most; 500 with 10% down payment
• Max. DTI: 43%
• Min. down payment: 3.5%
• PMI/MIP if less than 20% down?: MIP
• Notes: Mortgage insurance includes both an upfront and monthly payment

Jumbo

• Description: For loans that are larger than conventional loans
• Min. credit score: 680, but often higher
• Max. DTI: Around 43%
• Min. down payment: 10%
• PMI/MIP if less than 20% down?: Yes, mortgage insurance required
• Notes: Total amounts for conforming jumbo loans are set based on your area