California real estate is among the most expensive in the country, so getting the most competitive rate is essential for homebuyers looking to save money where they can.
One of the best ways to get the lowest possible mortgage rate is to comparison shop by comparing rates from multiple lenders.
What are the Current Mortgage Rates in California?
As of Wednesday, July 20, 2022, mortgage rates averaged the following in California, according to Bankrate data:
- 30-year fixed: 5.80%
- 15-year fixed: 5.03%
- 5/1 ARM: 3.94%
The 30- and 15-year rates track above the national averages published by Freddie Mac, while the 5/1 ARM is just below. Here are the national home loan rate averages for the week ending July 14: the 30-year, fixed-rate mortgage was 5.51%; the 15-year, fixed-rate mortgage was 4.67%; and the 5/1 adjustable rate mortgage (ARM) was 4.35%.
What Kind of Mortgage Is Right for You?
For those who want to maximize their dollars to ensure the highest return on investment, finding the right mortgage is essential. Some borrowers might think the best way to save money is to pay off their mortgage faster—by opting into a shorter loan term with higher monthly payments—but that’s not always the case.
If you can lock in a low mortgage rate it might be better to get a 30-year loan and put the extra money you save on monthly payments toward something that has a higher return on investment, like credit card debt or other high-interest loans.
Related: Best Mortgage Lenders
Types of Mortgages
Choosing the right mortgage depends on your financial situation and goals. A mortgage with low down payment requirements might make sense for some, while others may need a jumbo mortgage.
But there are several types of mortgages that tick a variety of boxes, here are some to consider:
Conventional Mortgages
Conventional mortgages are loans that conform to Fannie Mae and Freddie Mac underwriting standards. These are the most common mortgages that are not backed by the government.
Conventional mortgages tend to have stricter qualifications than government-backed loans, but they also offer advantages, such as looser home inspection standards and the ability to drop private mortgage insurance (PMI) after reaching 20% equity (without refinancing).
FHA Loans
Federal Housing Administration (FHA) loans have lower interest rates and only require a 3.5% down payment.
The downside of FHA loans is if you put less than 20% down, you must pay a mortgage insurance premium (MIP) which can’t be removed unless you refinance into a conventional mortgage.
VA Loans
Department of Veterans Affairs (VA) loans are only for active-duty military and veterans and their spouses. VA loans are advantageous because there are no down payment requirements, credit requirements aren’t as strict and your closing costs can be rolled into the loan.
USDA Mortgages
United States Department of Agriculture (USDA) loans are for homebuyers in rural and designated USDA areas. Similar to VA loans, USDA loans have no down payment requirements and the credit requirements are looser than conventional mortgages.
What You Should Know About Buying a Home in California
Right now, California property taxes are among the lowest in the country. According to the Tax Foundation, California’s property taxes were the fourteenth lowest in the U.S., with state and local property taxes amounting to $2,411 per capita.
Help for First-time Homebuyers
Buyers who need some assistance with a down payment or closing costs can take advantage of California’s many assistance programs. Some of these programs are designed to help first-time homebuyers (those who have not owned a home in three years) as well as low- and mid-income buyers.
The California Housing Finance Agency, or CalHFA, has several programs designed to help buyers achieve homeownership. Some of these programs include grants, no-interest deferred loans and financial assistance for the construction of accessory dwelling units (ADUs).
Related: Best Mortgage Lenders For First-time Homebuyers
More From Advisor
- Mortgage Interest Rates Today: July 21, 2022—Mortgage Rates Rose
- Current Mortgage Interest Rates: July 20, 2022—Rates Rose
- Current National Refinance Rates: July 20, 2022—Current Refinance Rates Advance Higher
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
