Sharon Klein, Broker/Owner
Contact Sharon!
845.255.1045
Serving the Mid-Hudson Valley, New York

Mortgage Programs

Private Lenders

If you are lucky enough to find a Ulster County New York home offering seller financing, you may save a huge amount of money in closing costs. Private lenders, although their rates may be a bit higher than conventional lenders, will not require many of the onerous junk fees charged by conventional lenders and their title companies. The closings are often much faster because there is no underwriting committee your paperwork has to go through. Also, private lenders will lend to borrowers that are often not qualified to go through conventional programs.

  • Conventional Loans - The only security guarantee is the value of the property.
  • Conforming Loans - Conventional loans that follow the terms and conditions established by the guidelines of Fannie Mae and Freddie Mac.
  • Fixed-Rate Mortgage - The interest rate and the principal payments remain fixed throughout the loan. Keep in mind your monthly escrow account payment could vary from year-to-year as taxes and insurance rates change.
  • Variable or Adjustable-Rate Mortgage - The interest rate on the loan fluctuates over the period of the loan. Periodic adjustments to the interest rate are made based on changes to a defined index. The loan's interest rate is determined by adding a fixed number of points to the defined index.
  • Balloon Loan - Short term, fixed-rate mortgage that has monthly payments usually based on a 30-year amortization schedule and a lump sum payment due at the end of term, usually 3, 5 or 7 years. The interest rate on balloon loans is usually less than a 15- or 30-year fixed-rate mortgage.
  • Piggyback Loan - A second mortgage that closes with the first. Often the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. The home buyer covers the remaining 10% with their down payment. (Some lenders will write a second mortgage of 15% or even 20% of the purchase price.)

Housing Finance Agencies

These agencies offer special loan programs to low- and moderate-income buyers, buyers interested in rehabilitating a home in a targeted area, and other groups as defined by the agency. Working through a housing finance agency, you can receive a below market interest rate, down payment assistance and other incentives. Find your local housing finance agency.

  • Jumbo and Non-Conforming Loans - Loans above the maximum amount established by the guidelines of Fannie Mae and Freddie Mac. Often the interest rate charged for a jumbo or non-conforming loan is higher than that of a conforming loan.
  • B/C Loans - Loans for borrowers who cannot meet the credit guidelines established by Fannie Mae and Freddie Mac. The purpose is to offer temporary financing to someone whose credit history disqualifies them for a conforming loan (including someone who has recently filed for bankruptcy, foreclosure or late payment on their credit report). Typically the interest rates run higher and vary depending upon the individual credit situation.

Government

  • FHA Loans - The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low- to moderate-income families qualify for mortgages. FHA assists first-time buyers and others who would not qualify for a conventional loan, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going market rate, while the down payment requirements for an FHA loan are lower than conventional loans. The required down payment can be as low as 3 percent and the closing costs can be included in the mortgage amount.
  • VA Loans - VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA Loan, which usually offers a competitive fixed interest rate, no down payment and limited closing costs. While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.
  • RHS Loan Programs - The Rural Housing Service (RHS), which is part of the U.S. Department of Agriculture, guarantees loans from private lenders to help low- to moderate income families qualify for mortgages.

Types of Mortgage Lenders

There are a number of types of primary mortgage lenders that you may encounter when shopping for your mortgage loan. To give you a better understanding of these service providers, a brief explanation is provided below.

  • Mortgage Bankers - typically originate loans and then sell these loans to the secondary mortgage market shortly after funding. (The mortgage banker may or may not sell the servicing of the loan.) Often mortgage bankers have attractive loan programs and rates.
  • Portfolio Lenders - make loans with the institution's own funds and keep the loan on the institution's books rather than immediately selling it to the secondary mortgage market. Many institutions engage in mortgage banking as well as portfolio lending.

    Since portfolio lenders fund the loans, they are not confined to Freddie Mac/Fannie Mae guidelines. After a portfolio loan has reached its one year anniversary date without any late payments, it is considered seasoned and may be sold to the secondary mortgage market even if it does not meet Freddie Mac/Fannie Mae guidelines.

    If a portfolio loan is sold to the secondary mortgage market, the portfolio lender may continue to service the loan.

  • Direct Lenders fund their own loans. Direct lenders usually fall into the category of a mortgage banker or portfolio lender.
  • Correspondents - act on behalf of one or several lenders (sponsors) throughout the origination and closing. The loan is usually underwritten by the sponsor. The correspondent acts as the lender's agent. The correspondent may also service the loan for the lender.
  • Mortgage Brokers - work as intermediaries between lenders and borrowers. Mortgage brokers have access to a number of lenders and often offer the most variety in loan programs. Brokers assist the borrower in filling out the loan application, obtaining the credit report and appraisal, selecting a loan program and finding a lender to fund the loan. In general, brokers do not make the decision to extend the loan and do not fund the loan.

    The mortgage broker may be paid by the borrower or the lender. Payment to the broker is typically included in the closing costs as either fees or points.

  • Wholesale Lenders - underwrite and fund mortgage loans. Wholesale lenders may also service the loan payments and ensure the loan's compliance with underwriting guidelines.
  • Banks, Credit Unions and Savings & Loans - use funds gathered from their customers through checking, savings and certificates of deposit to make mortgage loans. The institution may hold the loan in its portfolio or sell it to a secondary mortgage market.

Secondary Mortgage Market

When you apply for a home mortgage, you may be under the impression that the mortgage lender will be servicing the loan until it is paid off. This may not be the case. It is common practice for the mortgage loan to be bought and sold to a secondary mortgage market investor, sometimes more than once in the life of a loan.

These transactions will not affect your mortgage amount or your mortgage payment. The secondary mortgage market is comprised of investors like Fannie Mae and Freddie Mac. Selling loans to the secondary mortgage market provides primary lenders with funds needed to issue new mortgage loans.