Get Lower Closing Costs on a California FHA or VA Loan

Down payments and closing costs are two of the financial hurdles associated with buying a home in California. Even for borrowers who have plenty of income to cover their monthly mortgage payments, closing costs can still be an obstacle.

But they don’t have to be. There are certain things you can do to lower your California closing costs, particularly when using an FHA or VA mortgage loan to buy a house. This article explains how it all works.

What Are Closing Costs, and How Much Are They?

“Closing costs” is a collective term that refers to the various fees and charges you encounter when using a mortgage loan to buy a house in California. These can include the home appraisal fee, origination and processing fees, government recording fees and more.

(Note: At Bridgepoint Funding, we do not charge processing or lender fees. This could save you a significant amount of money at closing, compared to a company that does charge those fees.)

So, how much are closing costs in California? Along with New York and Texas, California is one of the more expensive states for home buyer closing costs. The total amount can vary, due to a number of factors. On average, however, buyers in California tend to pay somewhere between 3% and 5% of the purchase price in their closing costs. But again, it varies.

How to Lower Your Upfront Costs

If you have trouble coming up with the funds needed to cover your closing costs, you might still have options. In many cases, home buyers can reduce their closing costs on an FHA or VA loan by using a lender credit. This is a service we offer to our customers, and it’s particularly helpful for those with limited funds saved up for the down payment and closing costs.

Here’s how it works. As the borrower, you agree to a slight increase in the interest rate applied to your home loan. In exchange, we would offer a credit toward your closing costs. The end result is that you could end up paying thousands less in your overall California closing costs.

Depending on the specifics of the transaction, this credit could cover most or all of your closing costs. So it’s definitely worth considering.

A Strategy for FHA and VA Mortgage Loans

While this strategy can be applied to different loan types, it typically works best with FHA and VA loans. The VA mortgage program is limited to military members and veterans, in most cases. But FHA-insured mortgage loans are available to almost all home buyers across California.

Another benefit to using an FHA loan is that you can get a lower down payment. The Federal Housing Administration allows borrowers to make a down payment as low as 3.5% of the purchase price or the appraised value.

So if you’re looking for a way to lower your closing costs when buying a home in California – and you’d like a low down payment option as well – the FHA program is certainly worth a look.

If you are a military member or veteran, you’ll want to consider the VA program for the same reasons. In fact, the VA borrowers can eliminate their down-payment requirement altogether. That’s because the program offers 100% financing to eligible borrowers, along with an option to reduce your closing costs.

Learn more about VA loan benefits here.

There is a lot of flexibility within today’s mortgage industry. There are also a lot of misconceptions among home buyers, as far as closing costs and down payments. Some people think they have to make a down payment of 20% and spend thousands on closing costs, but that’s not necessarily true. As a home buyer in California, you have a lot of options when it comes to closing costs. And that’s where we come in!