Los Angeles Mortgage Rates

Living in Los Angeles

Home to Hollywood, Los Angeles is often first thought of as the entertainment capital of the United States, but the city has much more to offer. Whether it’s taking in a game at Dodger Stadium or hiking one of the area’s many canyons, visitors and residents alike have an abundance of sights and experiences to enjoy.

Home prices in LA reflect the city’s draw. The median price was $599,680 in June, 2.3% higher than it was last year, according to the California Association of Realtors. However, the number of homes sold has fallen significantly, dropping 12.6% since last year. So far in 2019, home sales are down 8%.

Buyers should be aware that, although home prices are rising, they may have more time to make decisions when shopping for their dream home. The median time for homes on the market was 45 days in June, which is a whopping 165% increase compared to last year.

The rules and costs of buying a home in Los Angeles

As in most states, the real estate market in Los Angeles is governed by specific rules, regulations and tax laws. Here are some of the most important things to know if you’re considering buying a home in Los Angeles.

Home seller and buyer laws

California law requires that sellers fill out two separate disclosure statements, a real estate Transfer Disclosure Statement (TDS) and a Natural Hazard Disclosure (NHD) statement. The TDS covers known deficits with the home’s features and systems, while the NHD focuses on issues stemming from natural disasters.

California — and, by extension, Los Angeles — also allows for both judicial and non-judicial foreclosures, which means it’s up to the lender to decide whether or not to go through the court system in the event of foreclosure. Still, in California, non-judicial foreclosures are more common since they are often cheaper and take less time. However, deficiency judgments, which means the lender may be able to sue you after foreclosure to recoup any losses, are only allowed if the lender chooses to pursue a judicial foreclosure.

Ownership rules within a household are also important to know when buying a home. California is what is commonly described as a community property state. This means all property acquired during a marriage — including any real estate property — must be split equally in the event of a divorce or annulment, regardless of the circumstances or whose name is on the title. This is different from living in a so-called equitable distribution state, in which a judge typically decides how to split a couple’s assets based on factors such as individual income.

Finally, buyers should know they do not have to hire an attorney to manage the closing of their home purchase, as is required in some states. California is an escrow state, meaning buyers are allowed to use a representative from an escrow or title company to handle the close.

Taxes

When property changes hands, most states — and many municipalities — collect a real estate transfer tax. In California, the state collects a tax based on the property’s sale price and calculated at the rate of $0.55 for each $500 of value. This means the sale of a $250,000 home would require payment of $275. Additionally, the City of Los Angeles imposes a documentary tax of $4.50 per $1,000. On that same $250,000 home, it would add an extra $1,125 to your tax bill.

On average, Los Angeles County charges 0.59% of the property’s value in taxes per year, according to Tax-Rates.org. This comes out to $3,538 in taxes on a home worth the median value of $599,680. At that rate, Los Angeles County has one of the highest median property tax rates in the country.

If paying those property taxes is an issue, there are property tax exemptions available, the most notable of which is the homeowner’s exemption. This allows the first $7,000 of the assessed value of your primary residence to be tax-free.Additional tax breaks are also available for disabled and non-disabled veterans.

Conforming loan limits

The conforming loan limit for a single-family home in Los Angeles County is $726,525, which is the limit for high-cost areas in 2019. These loan limits are set each year by the Federal Housing Finance Agency and represent the maximum amount you can borrow and still qualify for a loan guaranteed by government-sponsored enterprises Fannie Mae and Freddie Mac. The conforming loan limit for single-family homes in most of the country is $484,350, but it rises in pricier areas, such as Los Angeles.

Programs for homebuyers in Los Angeles

Fortunately, prospective buyers interested in buying a home in LA have access to several homebuying programs. Here are a few to consider.

Low Income Purchase Assistance Program

A program offered by the Los Angeles Housing and Community Investment Department, the Low Income Purchase Assistance Program offers low-income, first-time homebuyers the opportunity to purchase homes by providing loans to help cover their down payment and closing costs.

To qualify, buyers must:

  • Be a first-time homebuyer or have not owned a home in the last three years
  • Meet income limits (these range from $58,450 for a one-person household to $110,250 for a family of eight)
  • Be a U.S. citizen, lawful permanent resident or other qualified alien
  • Contribute at least 1% of the home’s purchase price from their own funds
  • Complete a homebuyer education course
  • Plan to use the home as a primary residence

Learn more.

Affordable Homeownership Program (AHOP)

The Los Angeles County Development Authority (LACDA) provides down payment assistance to low- and moderate-income first-time homebuyers. This assistance is provided in the form of a second mortgage, with payments deferred until the property is sold, transferred or refinanced.

To qualify, buyers must:

  • Meet program income limits (these range from $58,450 for a one-person household to $115,750 for a family of eight)
  • Complete a homeownership counseling from an approved agency
  • Plan to use the home as a primary residence

Learn more.

Los Angeles County NeighborhoodLIFT Program

In a collaboration with NeighborWorks America, Wells Fargo is offering grants worth up to $25,000 to put toward a down payment or closing costs. This program is based on income levels and is not limited to first-time homebuyers.

To qualify, buyers must:

  • Meet program income limits (these range from $84,050 to $137,850, depending on family size and loan type)
  • Purchase a home within Los Angeles
  • Complete a homebuyer education course from an approved provider
  • Plan to use the home as a primary residence

Learn more

Rate shopping tips

Shopping around for a mortgage rate is a key step in buying a home. Check out the tips on how to find the best rate for you.

Contact at least three lenders on the same day

Mortgage interest rates change daily. With that in mind, it’s best to make sure you talk to multiple lenders on the same day. This way, you can ensure that each lender is using the same base interest rate. By doing so, you can make an apples-to-apples comparison.

Give each lender the same information

Another way to ensure a fair comparison is to give each lender the exact same information. You should be prepared to provide each lender with your employment information and credit score, as well as statements for all of your other debts and assets. Ensuring each lender has exactly the same information helps you to get the most accurate quotes possible.

Add up all lender fees to determine the total cost of your loan

Besides paying interest on your mortgage, you’ll probably need to pay additional lending fees. These might include an application fee, underwriting fees, a fee to record your mortgage and a fee for any discount points you take on in exchange for a lower interest rate. Make sure you understand all the costs associated with your homebuying journey, so the final price tag is not a surprise.

Know when to lock in the rate

Once you’ve found a loan program that meets your needs, you can ensure the lender “locks in” the interest rate. That way you’ll be shielded if market interest rates go up before you close on your home. Some lenders may offer a float-down provision that allows you to adjust your rate if interest rates decrease after you lock in a rate. You should be aware that rate locks do have an expiration date, at an average of approximately 30 days. You may be able to file an extension if the deadline passes.

The information in this article is accurate as of the date of publishing.