Frequently Asked Questions
FAQ’s | Absolute Mortgage
Congratulations! Buying your first home is a big deal and we’re happy to help make it easy for you.
First, you should gather important documents and financial information. Then, we’ll help you explore your loan options. For more details, visit the step-by-step guide.
Most traditional mortgage companies do not contact their clients at all once the loan closes. At Absolute Mortgage, we provide annual debt and equity reviews with a fraud assessment free-of-charge every year for clients.
It is our obligation to help you manage this debt for its entirety to make sure your mortgage is working for you, instead of you working for it.
Here are a few commonly used loan terms. Find more in our glossary here.
- Adjustable Rate Mortgage:
A mortgage loan were the interest rate adjusts periodically based on the changes of a specified index such as the one-year Treasury Bill or the LIBOR.
- Annual Percentage Rate (APR):
The total cost of a mortgage stated as a yearly rate. It is typically higher than the note rate because it includes the base interest rate plus specific closing costs.
- Balloon Mortgage:
A mortgage that is amortized over a stated period but provides for a lump-sum payment due at an earlier period, e.g. 30-year due in 15, where the payments are based on 30-year repayment but the loan is due paid in full in 15 years.
- Conventional Mortgage:
A mortgage not obtained under a government-insured program.
- Fixed Interest Rates:
An interest rate which does not change during the term of the loan.
- Jumbo Loan:
A loan that exceeds the Fannie Mae legislated mortgage amount, which is currently $333,700. Jumbos are also called non-conforming loans.
- Private Mortgage Insurance (PMI):
Insurance written by a private company to protect the lender against loss resulting from nonpayment or default.
- Rate Lock:
A commitment issued by a lender to a borrower guaranteeing a specific interest rate for a specific period of time.
PMI stands for Private Mortgage Insurance. PMI is usually required when you buy a house with less than 20% down. Mortgage insurance protects lenders against the costs of foreclosure and is provided by private mortgage insurance companies. It also enables lenders to accept lower down payments than they would normally accept. Without mortgage insurance, you might not be able to buy a home without a 20% down payment. The lower your down payment, the higher your PMI. Your PMI premium is usually added to your monthly mortgage payment.
Can I get rid of the PMI on my loan?
Some lenders may require you pay PMI for one to two years before allowing you to apply to remove it. You can also cancel your PMI by refinancing and obtaining a new loan without PMI. If you are interested in canceling the PMI on your loan, contact your lender.
Yes. Your loan can be sold at any time. They are sold in a secondary mortgage market in which lenders frequently buy and sell pools of mortgages. When a lender buys your loan they assume all of the terms and conditions of the original loan. The only thing that changes when a loan is sold is to whom you will mail your payment. When your loan is sold, your original lender will notify you that your loan has been sold, who your new lender is, along with their contact information.
You cannot close a mortgage loan without locking in an interest rate. The longer the length of the lock, the points or the interest rate will become higher. This is because the longer the lock, the greater the risk for the lender offering that lock. After a lock expires, most lenders will let you re-lock at the higher of the original price and the originally locked price. In most cases you will not get a lower rate if rates drop. Lenders can lose money if your lock expires. This is because they are taking a risk by letting you lock in advance. If rates move higher, they are forced to give you the original rate at which you locked.
A pre-qualification is normally conducted by your mortgage specialist after he has interviewed you and determined, based on the information you’ve verbally provided him, the dollar amount you can be approved for. Your mortgage specialist will then issue you a pre-qualification letter. Mortgage specialists, however, do not make the final approval, so a pre-qualification is not a commitment to lend. A pre-qualification letter is used when you are making an offer on a property. The pre-qualification letter indicates to the seller that you are qualified to purchase the house you are making an offer on.
Pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is then submitted to an underwriter and a decision is made regarding your loan. If your loan is pre-approved, you are then issued a pre-approval certificate. Getting your loan pre-approved allows you to close very quickly when you do find a house. A pre-approval can help you negotiate a better price with the seller.
A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. A credit score attempts to condense a borrowers credit history into a single number. Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Credit-bureau models are developed from information in consumer credit-bureau reports.
A borrower’s credit score is calculated using numerous factors of their credit history:
- Late payments
- The amount of time credit has been established
- The amount of credit used versus the amount of credit available
- Length of time at present residence
- Employment history
- Negative credit information such as bankruptcies, charge-offs, collections, etc.
The term “Buying Down” the rate refers to the paying of discount points to obtain a lower interest rate. A discount point is one percent of the loan. For example, if you were charged one discount point on a $100,000 loan you would pay $1000.
Should I pay discount points?
A simple way of figuring out whether or not you should pay discount points requires an easy mathematical calculation. Divide the difference of the cost of discount points on two loans by the difference in the payment. If you’ll be keeping the loan longer than the number of months indicated, the payment of the discount points is mathematically warranted. Use this rule of thumb: If you plan to stay in the house for less than 3 years, do not pay points. If you plan to stay in the house for more than 5 years, pay 1 to 2 points. If you plan to stay in the house for between 3 and 5 years, it does not make a significant difference whether you pay points or not!
The most common reason people refinance is to save money. They are saving money by obtaining a lower interest rate, causing their monthly mortgage payment to be reduced or by reducing the term of the loan, thus saving money over the life of the loan.
People also refinance to consolidate debts and replace high-interest loans with a low-rate mortgage. The debts being consolidated may include credit lines, credit cards, second mortgages, student loans, etc. In many cases, a debt consolidation results in tax savings, because consumer loans are not tax deductible, and a mortgage loan is tax deductible.
Another reason people refinance is to convert their adjustable loan to a fixed loan. The main reason behind this type of refinance is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments.
If you are considering refinance, always consult with a Finance of America mortgage specialist to give you the best available options.