Brian R. Barnes
nmls # 238617
a.k.a 'The Loan Professor'
Focus on Frequently Asked Questions
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How do appraisers determine the fair market value of a property?
Appraisers generally use a sales comparison approach to determine the fair market value of the property you wish to purchase. This is comparing the
price of the property with that of the prices for which similar properties are selling in the same area.
What happened if I get my mortgage from another lender after the appraisal is done?
Usually lenders will accept current appraisals by certified appraisers that have been done within a reasonable length of time
How much money do I have to put down as a down payment?
The amount of money required as a down payment depends on the type of mortgage program available. Usually lenders require 20% of the total
mortgage as a down payment. However, there are programs you might qualify for that do not require any money up front. These include:
  • Zero Down Mortgage. If you are a veteran of the armed forces, you do not have to make a down payment. If you are not a vet, there are many
    lenders that do offer this program.
  • Low Down Payment Mortgage. The FHA program allows you to purchase a home with as little as 2 – 5% down.
  • Conventional - 80% loan with 20% down.

How do I determine how much money I can borrow with a mortgage?
In order to avoid the disappointment of choosing the home you want to buy and then finding out that you don’t qualify for that much of a mortgage, you
have to look at your income and expenses. When you total up all your expenses, including groceries, clothing and entertainment, you subtract it from
your income. This lets you know how much of a monthly payment you can afford. If you are currently paying rent, so not include the rent in the
expenses, because this will help make your mortgage payment.  We can quickly prequalify you

Is it better for me to be pre-approved for a mortgage?
If you have pre-approval for a mortgage, you know exactly what price range you can shop within for a home. Once you are pre-approved it makes it
easier to get a real estate agent to work with you to find the home you want. Most real estate agents will not put a lot of effort into working with you if you
are not pre-approved because they don’t know if you are really serious about buying or if you will get the mortgage from the lender.

Should I use a real estate agent when looking for a home?
A real estate agent will actively try to find a home that suits your taste and budget. He/she will search through the listings and make arrangements for
you to view the home. Although you can spend hours searching through the listings of homes for sale, you may have difficulty making appointments to
see what they look like inside without a real estate agent.

How much interest will I pay on my mortgage?
The amount of interest you pay depends on the amount of money you borrow. It also depends on the market conditions at the time. You can choose to
have a fixed rate loan where the rate of interest is set at the time you sign the mortgage papers. It is included with your payment and is a monthly
percentage of the total amount. The rate will not change for the term you choose, usually five years, even though you have the mortgage for 25 years. At
the end of the five year term, you renew the mortgage rate and the interest rate may be higher or lower. A variable rate mortgage means that the
interest rate fluctuates each month. You have a base amount that you have to pay on the mortgage, plus the interest rate, which will vary each month.
When interest rates are high, many homeowners choose this route, so they can lock in at a lower rate when it decreases. However, it does make it
difficult to budget because of the differing payments each month.

What does it mean to lock in an interest rate?
When you lock in an interest rate, your mortgage payment is calculated according to that rate of interest for a period of time. Usually the period is five
years and you know that your interest rate will not change during that period of time. If the interest rate should go down during the period, most lenders
will not allow you to change the terms unless there is a substantial drop.

What are the different types of mortgages and how do they work?
The different types of mortgages are:
  • Balloon mortgages. With this type of loan the payments and interest rate is fixed for a 35 year term, but you actually have to pay the mortgage off
    in full in five or seven years.
  • Bi-Weekly payments. You save money on the interest with a bi-weekly payment mortgage because you make 26 payments a year instead of 24.
    The payments are lower so they can fit into your budget easier.
  • FHA loans. The Federal Housing Administration does not provide you with the mortgage, but it does guarantee the loan, making it easier for
    you to obtain a mortgage.

Can I refinance my mortgage?
Most homeowners refinance their mortgage at various times during the life of the mortgage. You can refinance the mortgage to get extra money to
spend on the home to increase its value or even refinance to pay off other bills. It does extend the length of time it will take you to pay off your home.

How does home equity work?
Home equity lets you borrow up to 80% of the amount you have paid off on your mortgage to do repairs to the home or even take a trip. You need to
know how you want to spend the money when you consider a home equity loan. You can have a home equity line of credit so that you can still use the
money when you pay it off. A home equity loan can also be in the form of a lump sum payment and is often referred to as a second mortgage.

What are closing costs of a mortgage?
In addition to the mortgage itself, there are costs involved in getting the paper work completed. These include lawyer’s fees, insurance on the loan, the
costs of getting title searches and bank charges that are added to the total amount of the mortgage. In addition to these costs, you have to pay
insurance on your home as well as property taxes.

Why do you need an appraisal of the home before you get your mortgage approved?
The lender requires an appraisal of any property for which you apply for a mortgage to make sure that its value is equal to or greater
than the amount of money you wish to borrow. The value is called fair market value meaning that the property is selling for a
reasonable amount based on the current market conditions. You need to have a certified appraiser do the work and the lender will
usually have one that they can recommend to you.

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