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The Cost of Buying a Home in California: 2017 Update

California home prices and mortgage rates have changed quite a bit over the last couple of years. So we thought it would be helpful to do an updated analysis on the cost of buying a home in California, for 2017.

The Cost of Buying a Home in California

There are several different costs when buying a home, and the property itself is just one of them. You might also encounter fees relating to your mortgage loan, home appraisal, and other actions that occur along the path to homeownership. Here’s an updated look at the various costs of buying a home in California, starting with house prices.

Home Prices for the State and Major Cities

Home prices in California rose steadily over the last couple of years, though the trend varied quite a bit at the city level.

Statewide, house values rose by around 6.9% over the last 12 months (March 2016 – March 2017), according to the real estate data company Zillow. When this article was published, in late March 2017, the median home price in California was $490,100.

Looking forward, the economists at Zillow predicted a much lower level of appreciation. In March 2017, the company wrote: “California home values have gone up 6.9% over the past year and Zillow predicts they will rise 1.5% within the next year.”

Here were the median house prices reported in March 2017, for California’s ten most populous cities:

  • Los Angeles: $616,900 (market forecast)
  • San Diego: $555,400 (market forecast)
  • San Jose: $857,800 (market forecast)
  • San Francisco: $1,147,300
  • Fresno: $207,900
  • Sacramento: $290,600
  • Long Beach: $544,600
  • Oakland: $670,500
  • Bakersfield: $216,800
  • Anaheim: $561,200

As you can see, there’s a very broad spectrum of home values across the state of California. Consider, for example, the $900,000+ difference between median house prices in Fresno and San Francisco. So the cost of buying a home in California will largely depend on where you live.

The Down Payment Expense

The down payment is an important cost associated with buying a house, because it has to be paid up front. The average down payment in California is around 10%. But that doesn’t mean you’re required to put down that much. In fact, your down payment might range from 0% to 20%, depending on the type of home loan you use and other factors.

Here’s a look at minimum down payments across different programs:

  • VA-guaranteed mortgage loan: 0% down (100% financing)
  • FHA-insured loan: 3.5% down
  • Conventional home loan: 3% down in some cases
  • USDA / rural loans: 0% down

Another thing to consider is that the down payment doesn’t necessarily have to come out of your own pocket. Most mortgage programs these days allow for down payment gifts, which means the money could be provided by an approved third party.

The down payment is generally the biggest out-of-pocket cost when buying a home in California. But there’s a lot of flexibility when it comes to the size of the investment. Some mortgage programs offer low down payments that are better suited for borrowers with limited funds.

Please contact us if you have questions about these requirements.

California Closing Costs for Buyers

When buying a home in California, you’ll likely encounter some closing costs that have to be paid when you close. These are the different fees and charges incurred when using a mortgage loan to buy a home.

In 2016, conducted a state-by-state analysis to determine how much buyers were paying, on average, in both mortgage lender and third-party fees. Here’s what they found for California:

  • Mortgage origination, underwriting and processing fees: $1,144
  • Third-party fees (like home appraisal, credit reports, etc.): $1,113
  • Total closing costs for home buyer: $2,257

Of course, these are just averages. The amount you pay could vary from these figures, due to a number of factors. You’ll receive a detailed estimate when you apply for a mortgage loan.

Please contact us if you have questions about closing costs.

An Update on Mortgage Rates

According to the weekly market survey conducted by Freddie Mac, the average rate for a 30-year fixed mortgage loan was 4.23% for the week of March 23, 2017. A year earlier, that same average was 3.71%. So it has risen a bit over the last 12 months.

The Mortgage Bankers Association recently predicted that 30-year loan rates could rise to around 4.7% by the fourth quarter of 2017.

Depending on your credit score and the type of loan you use, you could qualify for a rate that is above or below average. It depends. That’s why it’s important to speak to a lender and get pre-approved for a mortgage loan. It gives you a better sense of what your actual housing costs will be.

Disclaimer: This article examines the cost of buying a home in California, as of March 2017. It includes averages relating to home prices, down payments, and closing expenses. We’ve provided this overview to give you a general idea of how much it costs to buy a house in California. Your expenses may vary significantly, due to a number of different variables.

Questions? Do you have questions about the cost of buying a home in California in 2017? We’re here to help! Bridgepoint Funding has been helping borrowers across the Golden State for well over a decade. Contact our in-house financing experts with any questions you have.

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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