How Much Will Your Mortgage Be in California?
Real estate in the Golden State is quite unique—out of all 50 states, citizens of California pay the largest share of their income (roughly one-quarter) on their mortgage, according to Nerd Wallet. Given its great size and generally robust economy, local housing trends are usually more relevant to consider than statewide housing tendencies when it comes to how much home you could afford in California.
For instance, the state's biggest metro areas—Los Angeles and San Francisco—have witnessed a rapid increase in housing prices over the last 20 or 30 years which have far outpaced growth in the rest of the state, which is still considerable.
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Factors That Can Affect Your California Mortgage Calculations
Price of Housing
California has had a harder time than most states when it comes to recovering from the economic downturn period beginning around 2008. According to Home buying Institute, the state ranks near the bottom in terms of stability, affordability, fluidity, and factors related to risk of loss, and roughly 1-in-4 homes are decreasing in value.
Housing is especially difficult to find in the more sought-after coastal areas where most of the population resides.
California has much to offer in terms of mild weather and scenic views of the ocean and mountains, but this comes at a steep price. With some of the highest taxes in the country, the California Department of Tax and Fee Administration reports that the base sales tax is currently 7.25% and a top marginal tax rate of 12.3%, both the highest in the US.
Legal Issues Related to Housing & Mortgages
To its credit, California offers considerable protections for homebuyers, in part because the state abandoned the "buyer beware" rule in real estate purchases, meaning sellers are obligated to disclose any problems with the property on an official form which the seller and real estate broker must sign by law.
California uses a legal process which does not involve the courthouse when it comes to deeds of trust which include a power-of-sale clause and a judicial process for mortgages. Non-judicial foreclosures are the most common type and make for a faster process.
California Property Taxes
The state's overall property taxes are less than the national average—the average effective property tax rate is 0.77%, while the national rate is 1.08%, based on figures from wallethub.com.
Closing Costs in California
A person who purchases their home for between $600,000 and $700,000 (the average cost of a home in California), will be paying anywhere from $4,860 and $5,670 in closing costs before taxes, according to finder.com. This price factors in your home inspection, appraisal, and origination costs, along with title insurance and courier fees.
California Job Stats to Consider
As of October 2019, the civilian labor force in California was just over 19.5 million and the unemployment rate was 3.6%. The occupations with the highest number of employees in the state are Office and Administrative Support, Sales, and Food Preparation and Serving, which employs greater than 5.5 million people.
Job Stats (Civilian Labor Force, Employment, Unemployment)
Other California Costs That Can Affect California Mortgage Calculations
California Private Mortgage Insurance (PMI)
Your PMI in California will depend on several factors such as the amount of your down payment, the loan-to-value ratio, and your credit score. Yearly PMI premiums can range from 0.3% to 1.5% of your original loan amount, which translates to between $30 to $70 due each month for every $100,000 you borrow in a standard mortgage insurance policy.
Home Insurance in California
When shopping around for home insurance in California, watch out for how much coverage you need based on the structure of your home, your personal belongings coverage, liability protection, and coverage for your living expenses.
The actual amount you will pay in insurance will vary depending on your provider and where you live.
California insurance agencies can offer widely different rates on home insurance: for instance, in Carlsbad (in San Diego County), premiums can vary between $308 and $1,958 per year, according to homeownersinsurancecover.net, The average home insurance deductible can also range between $500 and $1,000.
California Home Warranty
There is no shortage of home warranty providers serving California. Currently, the average premium is between $350, and $600, the average deductible being $50 to $100, based on figures from improvenet.com.