Home Appraisals: A Common Mortgage Requirement in California

This article is part of an ongoing series that explains some of the mortgage-related requirements when buying a house in California. In previous articles, we’ve covered things like credit scores, down payments, and monthly debt obligations. Today, we will talk about the home appraisal, another common mortgage requirement in California.

Banks and mortgage lenders use appraisals to determine how much a property is worth in the current market. This prevents a situation where a borrower takes out a loan for more than the home is worth. Here’s what you should know about the appraisal process when buying a home in California.

Common Mortgage Requirements in California

A mortgage loan is a major financial undertaking. Because of this, banks and mortgage lenders impose certain requirements and criteria for borrowers. Home appraisals are one of those common requirements.

Additionally, some home loan rules and requirements are passed down by secondary authorities such as the Federal Housing Administration or Freddie Mac. These organizations buy, guarantee and insure the mortgage loans made by lenders in the private sector. So they have their own requirements as well, including a home appraisal.

Common requirements when taking out a home loan in California include:

• A good credit score
• A manageable level of monthly debt
• Sufficient income to manage the monthly mortgage payments
• Documentation relating to income, assets and other financial factors
• A professional appraisal to determine the value of the property

Note: These aren’t the only home loan requirements in California. Depending on the type of mortgage product / program you use, you might encounter additional requirements as well. But these are some of the most common criteria, regardless of the type of loan being used.

We’ve covered some of these topics in previous blog posts. Today we will zero in on the home appraisal, which is almost always required for a California mortgage loan.

Why a Home Appraisal Is Required

Let’s start by talking about what exactly a home appraisal is. This will make it easier to understand why banks and mortgage lenders require them in most cases.

Anyone can hire an appraiser. Sellers sometimes have their own properties appraised to determine how much they’re worth. This is often done before selling or refinancing the house.

Home buyers can also pay to have a property appraised. This can help determine how much they need to offer. But in a typical real estate transaction, it is the bank or mortgage lender that requests the home appraisal. This is a common mortgage requirement in California.

Lenders carry a certain amount of risk when offering home loans to borrowers. In many cases, the lender is the one providing most of the funds. For example, if a home buyer makes a down payment of 20%, the lender is providing funding for the remaining 80%.

Because of this, banks and lenders need to know how much a particular property is worth in the current market. Home prices change all the time. They tend to rise over time, but they can also decline for a number reasons. Real estate markets rarely stay the same. They are always changing.

That’s why the home appraisal is a common mortgage requirement in California. It allows the lender or bank to determine how much the house is worth right now, given current real estate market conditions and recent sales activity.

The Home Buyer’s Role in All of This

As a home buyer, there really isn’t much for you to do during this process (other than be aware of it). The appraisal can affect your transaction, especially if the house appraises for less than the purchase price. But it’s basically a hands-off process from the buyer’s perspective.

Normally, the lender will request the appraisal. The appraiser will coordinate with the homeowner to gain access to the house. When the evaluation is complete, the appraiser will deliver the final appraisal report back to the lender for underwriting purposes.

Have mortgage questions? Bridgepoint Funding has been helping California home buyers and homeowners with their mortgage needs for nearly 20 years. We offer a broad range of mortgage products, some with flexible guidelines and requirements. Please contact us if you have financing-related questions or would like to apply for a loan!