California Mortgage Calculator

Factors in Your California Mortgage Payment

Your monthly mortgage payment will consist of your mortgage principal and interest. On top of that bill, you’ll have to consider property taxes and homeowners insurance as two more recurring expenses.

Property taxes in California are a relative bargain compared to the rest of the nation. With limits in place enforced by Proposition 13, generally property taxes cannot exceed 1% of a property’s market value. Assessed value cannot exceed increases of more than 2% a year. With those rules, California’s effective property tax rate is just 0.71%. On the local and county level, additional taxes can be levied if you live in a special district that’s financing an improvement or other local concern.

Unlike many other states which employ local assessors to determine market value, California bases your initial property tax rate on the purchase price of the property. Each year the value will increase by the rate of inflation, capped at 2%. If the property is your principal place of residence, you’re entitled to the homeowner’s exemption of $7,000 decreased assessed value, which cannot surpass $70 in savings.

As for homeowners insurance, California has reasonable rates. Despite the relatively frequent occurrence of natural disasters, including wildfires and earthquakes, the state has lower insurance costs than half of the nation. The average annual policy is about $1,027 a year, according to Insurance.com data.

You may want to consider additional insurance to cover earthquakes, as most homeowners insurance policies don’t cover earthquake damage. The California Earthquake Authority is a not-for-profit, privately funded and publicly managed provider of residential earthquake insurance. If you’re considering a property on the coast, you’ll want to take a look at the National Flood Insurance Program (NFIP) to help protect yourself from flood losses.

California also has what’s called the FAIR plan which offers coverage to all property owners as a last resort. This is your option if you can’t find insurance coverage anywhere else on the voluntary market. The coverage is not comprehensive (meaning it doesn’t cover all situations), but provides the absolute basic level of home insurance.

A financial advisor can help you understand how homeownership fits into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, taxes, insurance and more, to make sure you are preparing for the future.

Costs to Expect When Buying a Home in California

One of the costs you’ll want to consider during the home-buying process is a home inspection. Before you close the deal on a house, there’s usually a period where you can arrange a home inspection to determine the state of the house and any potential problems with the property. If problems are found, you generally have some negotiating power over the seller for repairs or price. Typical costs range from $200 to $500, with larger houses falling on the higher end of the price range. Some types of mortgages (such as a VA-backed loan) will require additional tests such as termite inspections. Any additional services will cost extra, but may help you discover serious issues prior to moving in, such as a mold infestation. One last consideration for testing is radon. California doesn’t have as high of risk for radon as some regions in the U.S. However, there are some areas, such as Tulare, that are depicted as having high concentrations of radon, according to the California Department of Conservation’s indoor radon potential map. You’ll want to check to see if your property is in one of those high-risk areas.

If the inspection goes well and you set a closing date for the home, you’ll have to budget for the additional fees that are called closing costs. These costs vary based on the location and value of the home, your mortgage lender and a number of other factors. On a county to county basis, closing costs in California average between 0.86% and 2.67% of your home's value.

Our Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources include the U.S. Census Bureau, Bankrate and government websites.

A large portion of your closing costs are paid to the lender and are known as origination fees. This includes underwriting, processing, mortgage broker fee, origination points, document preparation and commitment fees. The exact amounts per item will differ per lender. Additional funding fees or other charges will potentially be added to the total, if you’re getting a VA loan or other specialized type lending option.

Other costs you’re responsible for include credit reports, flood certification, survey or appraisal if you or the lender requires it, and an attorney fee if you choose to have one during the buying process. You also have to factor in the cost of title insurance. This type of insurance protects you and the mortgage lender if someone challenges the title to the property. There are two title insurance policy options in California: standard and extended. Extended policy insures against defects, liens, easements, encroachments and conflicts in boundary lines that aren’t reflected in public records. You’ll need a property survey usually for this type of policy. The buyer pays for the mortgage lender’s requirement for title insurance, but if you also buy owner’s coverage, it can be different. In Southern California, it’s customary that the seller pays for owner’s title insurance, but in Northern California, it’s usually split between buyer and seller.

You won’t have to worry about mortgage tax, as California does not charge buyers for purchasing a home, like New York does. However, there are a few transfer tax fees. Generally, the seller in California will pay the city transfer tax or split it with the buyer. The county transfer tax is almost exclusively paid for by the seller, at a rate of $1.10 per $1,000 or $0.55 per $500.

Details of California Housing Market

California, the third largest state by square miles, boasts the largest population of any state in the U.S. It has roughly 40 million residents grouped into three general regions: the southwest near Los Angeles and San Diego, the northwest Bay Area which contains San Francisco and its suburbs and the San Joaquin Valley which encompasses the cities of Stockton, Fresno and Bakersfield, along with plenty of farmland. Most of the eastern and far northern regions of the state are sparsely populated, with less than 10 people per square mile.

As a whole, California’s housing market has several issues including lack of affordable housing and a slow recovery from the recession. In our Healthiest Housing Markets study, California ranked 43rd in the country based on stability, affordability, fluidity and risk of loss factors. Our data also indicates that a quarter of the homes in California are currently decreasing in value.

However, the housing market is especially tough in coastal areas, where about two-thirds of the population lives. The San Francisco area remains the nation’s least affordable major housing market. Based on Census Bureau data, the median home value in San Francisco County is $1,152,300. In Santa Clara County, median home values fall a bit to $1,061,900, while Marin County has a median value of $1,053,600.

If those prices give you sticker shock, you may find that home prices are more attractive in the Central Valley region. The median home value is just $271,000 in Fresno County and $268,900 in Merced County. Sacramento prices are a bit higher, though, at $373,000, but that's still nowhere near the Bay Area price range.

Some of the major considerations of owning property in California other than price is earthquake risk, drought and wildfire. While each area has a different level of risk for each natural hazard, it’s something you’ll need to consider when budgeting for insurance as well as determining the best place to live for your housing requirements.

Local Economic Factors in California

While the West Coast is attractive to many with its long stretches of coastline, warm weather and plethora of exciting cities, it comes at a price: high taxes. California's taxes are some of the highest in the U.S., with a base sales tax rate of 7.25% and a top marginal income tax rate of 13.3%.

Although the Golden State has high taxes, it does play host to a number of bustling industries. Data from Statista.com shows the state is tied with New York for the most Fortune 500 company headquarters at 53.

Some of the most notable employers in the state include Apple, Chevron, Alphabet, Intel, Disney and Oracle. Of course, California is well-known for Silicon Valley, home to many startups and tech companies. Los Angeles, home of Hollywood, is key in the entertainment industry which is another large source of revenue. There’s also a number of military bases in the state in the San Diego area as well as northern California. And for tourism, the wine region of Napa Valley is a huge draw for many out-of-state visitors, as well as native Californians.

In December 2022, the overall unemployment rate for California was 4.1% compared to the national rate of 3.5%, according to the Bureau of Labor Statistics. However, California's per capita personal income in 2021 was $76,614, while the national average was $65,148, based on data from the U.S. Bureau of Economic Analysis.

Before you decide to move west to the Golden State, you might want to compare the cost of living to your current home. If you’re switching coasts and moving from New York to Los Angeles, your cost of living will be 12% lower on average, thanks to lower taxes and housing costs. If you’re trading Austin, a Texas tech hub, for the bigger tech hub of San Francisco, prepare for higher costs. You’ll pay 27% more on average to live in the Bay Area due to much higher food, housing and tax costs. If you’re moving from Portland, Oregon to sunnier San Diego, you’ll see a 9% increase in your cost of living on average.

Mortgage Legal Issues in California

One benefit of buying a property in California is its buyer’s protections. The state was at the forefront of abandoning the “caveat emptor” rule, also known as buyer beware, in real estate transactions. This means that sellers are required to disclose any issues or defects with the property on an extensive transfer disclosure statement that both the seller and real estate broker are required to sign. California, unlike many other states, has these rules backed by law. It’s not an optional disclosure, it’s mandatory.

The state also runs the Department of Consumer Affairs Bureau of Real Estate. This entity was created to protect public interest and increase consumer awareness in real estate transactions. You can visit its website to read information on the homebuying process, loan modification or foreclosure prevention, verify a real estate license, find answers to frequently asked questions and find who to call for complaints.

Curious how California handles foreclosures? The Golden State has a non-judicial (no courthouse involvement) process for deeds of trust that include a power-of-sale clause and a judicial process for mortgages. However, the most common foreclosure in the state is non-judicial, which generally means a speedier process. When a lender includes a power-of-sale clause, the lender trades a full loan payout for timeliness. This means a lender can’t collect a deficiency judgement against the homeowner. A deficiency is when the home doesn’t sell for the full amount of the mortgage on the property. While the lender may lose out on the full loan amount, the lender saves time and court fees using this speedy process.

When a judicial foreclosure occurs (which is rare in California), the process is much slower as the court is involved. The benefit to this process is that the homeowner has the right of redemption. This right allows the homeowner to buy the property back up to one year after the auction. However, with a judicial foreclosure, a lender can get a deficiency judgement which allows the lender to pursue the full mortgage amount from the borrower.

With a non-judicial foreclosure in California, you will get a series of notices that will alert you of the impending steps. The lender has to contact you to assess your financial situation in what’s called a foreclosure avoidance assessment. The foreclosure process cannot start until at least 30 days after you were contacted for the assessment. After that, a Notice of Default can be recorded in your county. This is the start of the formal and public foreclosure process. You have 90 days to “cure,” which means pay, what’s owed. If you don’t pay, a Notice of Sale is recorded (no earlier than 90 days after the Notice of Default). The sale will state that your home will be sold at auction in 21 days. You can pay the default and “reinstate” your loan up to five days prior to the auction. If you want to learn more, the California Courts has a webpage on your rights as a homeowner and the state’s foreclosure process.

California Mortgage Resources

Hopeful homeowners have a number of agencies to turn to in California. The California Housing Finance Agency (CalHFA) has loan programs such the first mortgage conventional or CalPLUS fixed-rate loan, down payment assistance programs and mortgage credit certificates. In addition to lending programs, you can find an online homebuyer education course as well as links to NeighborWorks or HUD in-person education.

First-time homebuyers in Los Angeles County or Orange County can turn to the Southern California Home Financing Authority (SCHFA) for help. The organization offers help with securing a home loan as well as up to 4% down payment assistance in the form of a non-repayable grant.

For those looking for property in the rural areas of the state, you can see if the property qualifies for USDA eligible loans. You’ll need to meet requirements such as income limits and credit score to qualify for this government-backed loan program.