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Compare mortgage rates in California.
Key Points
• Mortgage rates in California have trended lower than the national average for decades, and economists predict they’ll be dropping further into 2025.
• Mortgage rates are influenced by economic factors such as inflation, unemployment, and the federal funds rate.
• Lower interest rates result in lower monthly payments, making it easier to afford the same-priced home.
• California offers the full range of mortgage types, including fixed-rate, adjustable-rate, FHA, VA, and USDA loans.
• Jumbo loans are for home purchases requiring loans greater than $806,500 — higher in some areas.
Introduction to Mortgage Rates
Obtaining a home loan is a significant financial decision, and understanding mortgage interest rates is essential for homebuyers in California and elsewhere. Here you’ll find a comprehensive overview of mortgage rates in California, including the factors that influence them, historical trends, and available mortgage types. By staying informed about current rates and exploring assistance programs, individuals can make strategic decisions that support their financial goals and achieve homeownership in California.
Mortgage interest rates are the fees charged by lenders for borrowing money to purchase a home. These mortgage rates are determined by a complex combination of factors that can be separated into two buckets: the state of the economy and the borrower’s financial status.
Economic Factors Influencing Mortgage Rates
Economic conditions play a significant role in determining mortgage rates. Key factors include:
• The Federal Reserve: Often referred to as the Fed, the country’s central bank sets the short-term interest rates that banks use. Although home loan rates are not directly tied to Fed rates, they tend to follow the same economic trends. When the Fed lowers interest rates (to much fanfare), mortgage rates are likely to follow.
• Inflation: When inflation eases, the purchasing power of money increases, making it less expensive for lenders to lend money. As a result, they may pass along the savings to consumers through lower interest rates.
• Unemployment Rate: A lower unemployment rate can lead to higher mortgage rates. A low unemployment rate indicates a strong economy, which typically leads to increased demand for housing. This increased demand puts upward pressure on home prices and, consequently, mortgage interest rates.
Borrower Factors Influencing Mortgage Rates
In addition to economic factors, a borrower’s financial situation also impacts mortgage rates.
• Credit Score: A higher credit score generally translates to a lower mortgage interest rate. Lenders view a high credit score as an indication of responsible financial behavior, reducing the perceived risk of default.
• Down Payment: Increasing the down payment can lower the mortgage interest rate. A larger down payment reduces the loan amount and the debt-to-income ratio, making the borrower less risky in the eyes of the lender.
• Income and Assets: A steady income is important to lenders, who will examine your employment history and salary. Assets such as investments and emergency savings also reassure lenders that you could still pay your mortgage in the event of a job loss or other financial setback.
• Type of Mortgage Loan: Certain types of mortgages tend to have lower rates. For instance, adjustable-rate mortgages (ARMs) typically offer lower initial rates than fixed-rate mortgages. Some government-backed loans, like VA mortgages, can also have lower rates. Additionally, a shorter loan term usually comes with a lower rate than longer terms.
How Mortgage Rates Affect Home Affordability
Mortgage rates have a more significant impact on home affordability than many people realize. Even small changes in interest rates can put homeownership out of reach for middle-income Americans. For instance, a 1.00% increase in interest rate on a $300,000 mortgage can result in an additional $188 in monthly payments. Over the life of the loan, that adds up to $67,746 in additional interest.
Should Homebuyers Wait for Interest Rates to Drop?
Many first-time homebuyers wonder if they should buy now or wait for interest rates to come down further. While it’s tempting to wait for rock-bottom rates, there are a few things to consider. First, no one can predict the future of interest rates with certainty — “timing the market” is a challenge even for the experts.
Second, waiting for rates to drop could mean missing out on the opportunity to buy a home when prices are favorable. A year or two from now, prices could rise beyond the reach of your budget. Finally, it’s important to note that you can always refinance a mortgage, potentially securing a lower interest rate in the future.
Recommended: The Best Affordable Places in the U.S.
California Mortgage Rate Trends
| Year | California Rate | U.S. Rate |
|---|---|---|
| 2000 | 7.18 | 8.14 |
| 2001 | 6.78 | 7.03 |
| 2002 | 6.20 | 6.62 |
| 2003 | 5.54 | 5.83 |
| 2004 | 5.48 | 5.95 |
| 2005 | 5.65 | 6.00 |
| 2006 | 6.49 | 6.60 |
| 2007 | 6.38 | 6.44 |
| 2008 | 6.13 | 6.09 |
| 2009 | 5.08 | 5.06 |
| 2010 | 4.83 | 4.84 |
| 2011 | 4.54 | 4.66 |
| 2012 | 3.69 | 3.74 |
| 2013 | 3.85 | 3.92 |
| 2014 | 4.04 | 4.24 |
| 2015 | 3.80 | 3.91 |
| 2016 | 3.63 | 3.72 |
| 2017 | 3.94 | 4.03 |
| 2018 | 4.38 | 4.57 |
Historical U.S. Mortgage Rates
Over the past 50 years, national rates have experienced significant fluctuations, ranging from a low of around 3% in the early 1970s to a high of over 18% in the early 1980s. Currently, rates are hovering around 6%, which is relatively low compared to historical averages.
Types of Mortgages Available in California
California offers all the types of mortgage loans available to borrowers nationwide. In an April 2024 SoFi survey of 500 people intending to purchase a home, 38% of respondents said that understanding mortgage options is one of the most confusing parts of the home buying process. So take a moment to review the options below — there may be some surprises.
Conventional Loans
Conventional loans are not backed by the government and typically require a down payment of at least 3%. (The national average down payment is 15%.) They can be fixed-rate or adjustable-rate.
Fixed-Rate Mortgage
Fixed-rate mortgages maintain the same interest rate throughout the life of the loan, ensuring that the principal and interest payments remain constant. Fixed-rate mortgages are available in terms of 10, 15, 20, or 30 years.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages (ARMs) initially offer a lower rate than fixed-rate loans. However, after a certain period (usually 5 or 7 years), the interest rate can adjust periodically based on market conditions. ARMs can be beneficial if you plan to sell the home before the fixed period ends or if you expect interest rates to decrease in the future.
FHA Loan
FHA loans usually have more lenient eligibility requirements than conventional loans. These mortgages are insured by the Federal Housing Administration, which helps reduce the risk to lenders, allowing them to offer lower interest rates and reduced down payment requirements.
VA Loans
VA loans are available to veterans, active-duty military members, and some Reserve and National Guard members. One of the primary benefits of VA loans is that they do not require a down payment, making them an attractive option for veterans.
USDA Loans
USDA loans are designed for low-income borrowers looking to purchase a home in a rural area. These loans are backed by the U.S. Department of Agriculture (USDA) and offer competitive interest rates and relaxed credit requirements.
Jumbo Loans
Jumbo loans are conventional loans that exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In California, the conforming loan limit for single-unit residences ranges from $806,500 in many counties to $1,209,750 in higher priced neighborhoods in the Bay Area and Los Angeles. Jumbo loans typically require a larger down payment and may have higher interest rates than conforming loans.
Popular Places to Get a Mortgage in California
Securing a mortgage often depends on choosing the right location, where home prices are affordable and mortgage terms are favorable. Factors such as cost of living, proximity to supermarkets and good schools, and job opportunities also play a significant role.
Least Expensive Locations
One way homebuyers can search for affordable areas is by checking their cost of living compared to the overall cost of living in the U.S. Cities with a cost of living index (COLI) number of less than 100 are relatively affordable; COLIs of more than 100 are more expensive. In high-priced states like California, however, most cities rank above the average.
That means not only is housing likely more expensive, but so are the average monthly expenses for one person. Some of the least expensive locations to get a mortgage in California include:
• Bakersfield: Bakersfield is a city in the southern Central Valley and offers a low cost of living compared to other parts of California. COLI: 109.6.
• Stockton: Stockton is a city in the San Joaquin Valley and offers a relatively affordable housing market. It has a variety of mortgage options, including government-backed loans and low down payment programs. COLI: 122.6.
• Modesto: Modesto is a city in the Central Valley and offers a low cost of living compared to other parts of California. It has a variety of mortgage options, including government-backed loans and low down payment programs. COLI: 117.7.
Most Expensive Locations
On the other hand, some of the most expensive locations to get a mortgage in California include:
• San Francisco: San Francisco is consistently ranked as one of the most expensive cities in the U.S. and has a high cost of living. COLI: 169.6.
• Los Angeles: Los Angeles is another major metropolitan area with a high cost of living. COLI: 150.6.
• San Diego: San Diego is known for its beautiful weather and high quality of life, which contributes to its high cost of living. COLI: 144.2.
• Santa Barbara: Santa Barbara is a coastal city known for its beautiful scenery and mild climate. COLI: 167.
• Palo Alto: Palo Alto is a city in the Silicon Valley and is known for its high concentration of technology companies. COLI: 156.
Tips for Securing a Competitive Mortgage Rate in California
Obtaining a competitive mortgage rate is crucial for saving money over the life of a loan. Even half a percentage point can translate to tens of thousands of dollars in interest paid. Here are some tips for securing a competitive mortgage rate in California, from getting preapproved to comparing interest rates and fees:
• Get Preapproved: Getting preapproved for a mortgage strengthens your position as a buyer and allows you to move quickly when you find the right property. It also gives you a better idea of how much you can afford to borrow. The mortgage preapproval process can take up to 10 days.
• Consider a Shorter Loan Term: Shorter loan terms typically come with lower interest rates. If you can afford it, opting for a shorter loan term can save you money in interest over the life of the loan.
• Improve Your Credit Score: A higher credit score can lead to a lower mortgage interest rate. Take steps to improve your credit score, such as paying bills on time and reducing your debt.
• Make a Larger Down Payment: Increasing your down payment can lower your mortgage interest rate. If you can afford it, try to make a down payment of at least 20% to avoid paying private mortgage insurance (PMI).
• Consider Government-Backed Loans: Government-backed loans, such as FHA loans and VA loans, often have lower interest rates than conventional loans. If you qualify for a government-backed loan, it may be a good option for you.
Once you’ve aligned your proverbial ducks, here are two additional tips to help you secure the best possible rate:
Compare Interest Rates and Fees
Take the time to compare interest rates and fees from multiple lenders. Don’t just go with the first offer you receive. Be sure to ask about any upfront costs or closing fees associated with the loan.
California Mortgage Resources
California offers various resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources.
First-Time Homebuyer Programs
The California Housing Finance Agency (CalHFA) offers programs specifically designed to assist those buying their first home. These programs include both conventional and government-backed first mortgages. Buyers must meet income limits and minimum credit score requirements. For additional information on the below programs, visit our California First-Time Home Buying Assistance page.
• CalHFA FHA Loan
• CalPLUS FHA Loan
• CalHFA VA Loan
• CalHFA USDA Loan
• CalHFA Conventional Loan
• CalPLUS Conventional Loan
Down Payment Assistance
California’s MyHome program provides qualified borrowers with down payment assistance. Homebuyers with government-backed mortgages can apply for a junior loan of up to 3.5% of the home purchase price to cover down payment and closing costs. Payments are deferred until you sell, refinance, or pay off your mortgage.
Tools & Calculators
SoFi provides online tools and calculators to help homebuyers estimate their monthly mortgage payments, see how much home they can afford, and look ahead to their ultimate mortgage payoff date. These resources can empower homebuyers to make informed decisions throughout the homebuying process.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in California
Homeowners in California may also consider refinancing their mortgage to secure a lower interest rate or access cash for other financial needs. Mortgage refinance options in California include:• FHA Streamline Refinance: The FHA Streamline Refinance allows FHA-insured homeowners to refinance into current mortgage rates with minimal hassle.
• VA Interest-Rate Reduction Refinance Loan: An IRRRL can reduce the monthly payments on VA loans by adjusting the APR.
• Conventional Refinance: Conventional refinance loans are available to homeowners who do not have FHA or VA loans. Conventional refinance loans may offer lower interest rates and flexible terms.
Closing Costs, Taxes, and Fees in California
When purchasing a home in California, buyers can expect to pay various closing costs, taxes, and fees. These costs typically range between 2% and 5% of the home’s purchase price and may include:
Closing costs can include any or all of the following:
• Loan Origination Fee: A fee charged by the lender for processing the mortgage application.
• Appraisal Fee: A fee paid to an appraiser to determine the value of the home.
• Credit Report Fee: A fee paid to a credit bureau for obtaining the borrower’s credit report.
• Title Insurance: Insurance that protects the lender against any claims on the title to the property.
• Recording Fee: A fee paid to the county recorder for recording the mortgage documents.
• Transfer Tax: A tax paid to the state or county when the property is transferred from the seller to the buyer.
• Homeowners Insurance: Insurance that protects the homeowner against damage to the property.
• Property Taxes: Taxes paid to the local government based on the assessed value of the property.
Factors influencing closing costs in California include property value and location. It’s important for homebuyers to carefully review the closing disclosure provided by the lender to understand all associated costs and fees.
The Takeaway
California’s mortgage landscape offers a range of options for homebuyers. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership in California.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Will mortgage rates drop in California?
Following the Federal Reserve’s initial rate reduction in 2024, a decrease in mortgage rates is anticipated. Economists expect additional rate cuts, which should further reduce mortgage rates into 2025. Predicting long-term mortgage rates beyond this period remains challenging.
Will mortgage rates ever go back to normal?
Current mortgage rates are near the historical average. In other words, they’re “normal.” Despite expected rate reductions, the exceptionally low rates seen in 2021 are not expected to return in the near future.
Will California home prices ever drop?
Forecasting California home prices is tough given that they’re shaped by multiple factors such population changes, market conditions, and new development. But they’re unlikely to drop significantly in the near future.
Is it a good time to buy a house in California?
It’s probably as good a year to buy as any. Interest rate cuts are likely to spur more homeowners to put their homes on the market, increasing inventory. On the flip side, more homebuyers will increase the competition for available homes. The real question is whether your finances and your family are ready to make this move.
How to lock in a mortgage rate?
Locking in a mortgage rate means securing a specific interest rate for a certain period, typically 30 to 90 days. However, rate locks are typically unnecessary in an environment of falling interest rates.
How do mortgage interest rates work?
Mortgage interest rates are the fees charged by lenders for borrowing money to purchase a home. These rates are influenced by various factors, including the state of the economy, inflation, the unemployment rate, and the borrower’s financial situation. Lenders assess the borrower’s credit score, income and assets, and loan amount to determine the interest rate offered. Mortgage interest rates can be fixed, meaning they remain the same throughout the loan term, or adjustable, meaning they can change periodically based on market conditions.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process