Why Are California Mortgage Rates Sometimes Higher Than National Averages?
California mortgage rates appear higher than national averages primarily because California homebuyers frequently borrow larger loan amounts that exceed conforming limits. When your loan crosses into jumbo territory, you may face different pricing structures. However, the reality is more nuanced than headlines suggest—California's conforming loan rates are often competitive with or even slightly below national averages, and several loan programs offer excellent rates regardless of property values.
Understanding why California mortgage rates sometimes differ from national figures can help you make smarter borrowing decisions and potentially save thousands over the life of your loan.
The Real Reason: It's About Loan Size, Not Location
The perception that California has higher mortgage rates stems from a fundamental misunderstanding. Lenders don't charge more simply because a property sits in California. Instead, the rate difference relates to loan size and how loans are categorized.
According to Bankrate, as of January 2026, California's average 30-year fixed purchase rate is 6.22%, while the national average sits at 6.18%—a difference of just 0.04 percentage points. For conforming loans, California rates track very closely with national averages.
The disconnect happens because California's median home price of $744,000 means many buyers need loans that exceed standard conforming limits, pushing them into jumbo loan territory with different pricing dynamics.
Understanding High-Cost Area Designations
The Federal Housing Finance Agency (FHFA) recognizes that housing costs vary dramatically across the country. To account for this, they establish higher conforming loan limits in designated "high-cost areas."
2026 Conforming Loan Limits
According to the FHFA's November 2025 announcement:
| Loan Type | Baseline Limit | California High-Cost Areas |
|---|---|---|
| 1-Unit Property | $832,750 | $1,249,125 |
| 2-Unit Property | $1,066,350 | $1,599,525 |
| 3-Unit Property | $1,288,950 | $1,933,425 |
| 4-Unit Property | $1,602,300 | $2,403,450 |
California counties qualifying for the maximum high-cost limits include:
- Los Angeles County
- Orange County
- San Francisco County
- San Mateo County
- Santa Clara County
- Alameda County
- Contra Costa County
- Marin County
- San Benito County
- Santa Cruz County
If your loan amount falls within these limits, you can access conforming loan rates, which are typically the most competitive in the market.
The Jumbo Loan Premium: What to Expect
When your loan amount exceeds conforming limits—even the high-cost area limits—you enter jumbo loan territory. Historically, jumbo loans carried higher interest rates than conforming loans because lenders couldn't sell them to Fannie Mae or Freddie Mac, keeping the risk on their own books.
Current Jumbo vs. Conforming Rate Comparison
Here's where things get interesting for 2026. According to Bankrate's jumbo rate data, the traditional relationship has shifted:
| Loan Type | Current Average Rate | Historical Pattern |
|---|---|---|
| 30-Year Conforming | 6.22% | Benchmark rate |
| 30-Year Jumbo | 6.40% (6.45% APR) | Historically 0.25-0.50% higher |
| Rate Difference | ~0.18% | Gap has narrowed significantly |
The jumbo premium has compressed significantly from historical norms. As Experian notes, jumbo rates are now often competitive with—or even lower than—conforming rates for well-qualified borrowers.
Why Jumbo Rates Have Become More Competitive
Several factors explain the narrowing gap:
- Borrower Quality: Jumbo borrowers typically have excellent credit scores (700+), substantial assets, and low debt-to-income ratios
- No Loan-Level Price Adjustments (LLPAs): Conforming loans include pricing adjustments for credit scores below 780 or down payments under 25%—jumbo loans often don't
- Portfolio Lending Competition: Banks competing for high-net-worth clients offer competitive jumbo pricing
- Larger Profit Margins on Bigger Loans: Lenders can accept smaller rate premiums on larger loan amounts
If you're a highly qualified borrower purchasing in a California high-cost area, don't assume jumbo rates will significantly impact your costs. Get quotes for both conforming and jumbo options—you might be surprised.
California-Specific Costs That Affect Your Bottom Line
While California doesn't impose a mortgage tax like some states, other transaction costs can add up:
Closing Cost Comparison
| Cost Category | California | National Average |
|---|---|---|
| Total Closing Costs | 2-5% of purchase price | 2-5% of purchase price |
| Title Insurance | ~0.18% of sale price (varies by insurer) | ~0.5% average |
| Documentary Transfer Tax | $1.10 per $1,000 (state) | Varies by state |
| City Transfer Taxes | Up to $4.50 per $1,000 (LA) | Often none |
| Origination Fees | ~1% of loan amount | ~1% of loan amount |
According to Anytime Estimate's California calculator, title insurance rates in California are "filed" but can vary between companies—shopping around can yield savings.
One California advantage: no mortgage recording tax, which some states charge as a percentage of the loan amount.
When California Mortgage Rates ARE Competitive
Don't let the "California rates are higher" narrative discourage you. Several scenarios offer excellent rate opportunities:
1. Conforming Loans Under High-Cost Limits
If your loan amount stays under $1,249,125 in high-cost counties, you'll access standard conforming rates that match or beat national averages. With California's elevated limits, this covers most transactions in major metro areas.
Explore our conventional loan programs to see current conforming options.
2. VA Loans for Veterans
VA loans offer California veterans exceptional value. According to Bankrate's VA loan guide, veterans with full entitlement face no loan limits whatsoever since 2020. This means:
- No down payment required, even on $1.5 million+ homes
- No private mortgage insurance (PMI)
- Competitive rates that often beat conventional options
- No jumbo loan premium for full-entitlement borrowers
For California veterans, this represents a significant advantage. Learn more about VA loan benefits for California homebuyers.
3. FHA Loans in High-Cost Areas
FHA loan limits in California high-cost areas reach $1,149,825 for 2026, allowing many buyers to access FHA's competitive rates and lower down payment requirements.
4. High-Balance "Super Conforming" Loans
Loans between $832,750 and $1,249,125 fall into the "high-balance" or "super conforming" category. While these may carry a small premium over baseline conforming loans (typically 0.125-0.25%), they remain significantly more competitive than true jumbo pricing.
How to Get Better Mortgage Rates in California
Regardless of your loan size, these strategies can help you secure the best possible rate:
1. Maximize Your Credit Score
For conforming loans, every 20-point increment matters due to Loan-Level Price Adjustments. A score of 780+ qualifies for the best pricing. For jumbo loans, aim for 700 minimum, but 740+ opens more doors.
2. Increase Your Down Payment
| Down Payment | Impact |
|---|---|
| 5% | Maximum LLPAs apply; PMI required |
| 10% | Reduced LLPAs; PMI required |
| 20% | No PMI; moderate LLPA reduction |
| 25%+ | Best LLPA pricing for conforming |
| 30%+ | Optimal jumbo loan pricing |
3. Shop Multiple Lenders
Rate shopping is critical in California's competitive market. Get quotes from:
- Local mortgage brokers who work with multiple lenders
- Direct lenders and banks
- Credit unions
- Online lenders
According to the Consumer Financial Protection Bureau, borrowers who get three or more quotes save an average of $1,500 over the life of their loan.
4. Consider Adjustable-Rate Mortgages (ARMs)
If you plan to sell or refinance within 5-7 years, ARM products often offer rates 0.5-1% below fixed-rate options. This can be particularly valuable for high-balance loans.
5. Buy Down Your Rate
Paying discount points (1 point = 1% of loan amount) can reduce your rate by approximately 0.25% per point. On a $1 million loan, paying $10,000 upfront to save 0.25% could save over $25,000 in interest over 30 years.
6. Time Your Rate Lock
Mortgage rates fluctuate daily. Work with your lender to monitor rates and lock when conditions are favorable. Extended rate lock periods (60-90 days) may cost slightly more but provide protection during longer escrows.
California vs. National Rates: The Complete Picture
Here's a comprehensive comparison based on current market data:
| Loan Type | California Average | National Average | Difference |
|---|---|---|---|
| 30-Year Fixed (Conforming) | 6.22% | 6.18% | +0.04% |
| 15-Year Fixed | 5.73% | 5.70% | +0.03% |
| 30-Year Fixed (Jumbo) | 6.67% | 6.45% | +0.22% |
| 30-Year Fixed Refi | 6.56% | 6.63% | -0.07% |
| VA Loan | Competitive | Competitive | Minimal |
Rates as of January 2026. Source: Bankrate
Key Takeaways:
- Conforming rates are nearly identical to national averages
- Jumbo rates show a modest California premium
- Refinance rates actually favor California borrowers
- VA loans remain competitive regardless of loan size
Ready to Explore Your Options?
Understanding California's mortgage rate landscape empowers you to make informed decisions. Whether you're purchasing a $600,000 condo in Sacramento or a $2 million home in Orange County, the right loan structure can save you tens of thousands of dollars.
Apply now to get personalized rate quotes based on your specific situation, credit profile, and target property.
Frequently Asked Questions
Why do California mortgage rates seem higher than other states?
California mortgage rates appear higher primarily because the state's elevated home prices push many borrowers into jumbo loan territory, which historically carried rate premiums. For conforming loans within high-cost area limits ($1,249,125 in 2026), California rates typically match national averages within a few basis points.
What is the conforming loan limit in California for 2026?
The 2026 conforming loan limit ranges from $832,750 (baseline) to $1,249,125 in designated high-cost California counties including Los Angeles, Orange, San Francisco, Santa Clara, and Alameda counties. Loans within these limits qualify for competitive conforming rates.
Are jumbo loan rates always higher than conforming rates?
Not anymore. While jumbo rates historically exceeded conforming rates by 0.25-0.50%, that gap has narrowed significantly. In early 2026, jumbo rates are only about 0.15-0.25% higher, and well-qualified borrowers may find jumbo rates competitive with or even below conforming options due to the absence of loan-level price adjustments.
Do VA loans have limits in California?
No. Since 2020, veterans with full entitlement face no VA loan limits. This means California veterans can finance homes of any value with zero down payment and no private mortgage insurance, making VA loans exceptionally valuable in high-cost markets.
How can I get a lower mortgage rate in California?
Focus on improving your credit score (780+ for best conforming pricing), increasing your down payment (25%+ reduces pricing adjustments), shopping multiple lenders (compare at least 3-5 quotes), and considering whether an adjustable-rate mortgage fits your timeline. Working with a local mortgage broker who understands California's market can also help identify the best options.
Is it cheaper to buy in California border areas to get lower rates?
Mortgage rates don't vary by California location—they vary by loan amount relative to conforming limits. Buying in a less expensive California area could help you stay within conforming limits, which typically offer the best rates. However, the cost savings come from loan classification, not geographic pricing differences.
Last verified: January 2026. Mortgage rates change daily. The information provided is for educational purposes and does not constitute a loan offer. Actual rates depend on creditworthiness, loan amount, property type, and market conditions. Contact a licensed mortgage professional for personalized rate quotes.
Aditya Choksi | NMLS# [License Number] | California Department of Real Estate