Using a Second Mortgage for an 80-20 No Money Down Home Purchase Loan Posted by nick_niesen on October 29th Wholesale Nazair Jones Jersey , 2010
Many renters want to own their own home, but they simply don聮t have the down payment to make the purchase. If you聮re able to afford a house payment as much as your monthly rent, an 80-20 no money down loan could get you out of the rent trap. (80% first mortgage - 20% second mortgage) "It allows people to buy without a down payment, or for those people who would prefer not to touch their savings to get into a house Wholesale Delano Hill Jersey ," says mortgage expert. "What we're seeing is a lot of young professionals," he adds. "People who have gotten out of college and have good jobs. They have good credit, but they haven't had the opportunity to accumulate a lot of savings."
The 80-20 loans are also known as piggyback loans. The buyer takes out a loan for 80% of the cost of the home. Then takes out a second mortgage for 20% of the loan to use as a down payment. The homebuyer has three options for the 20% part of the loan. Most often the 20% loan is secured from a separate lender, but look up for the second loan to have a higher interest rate.
MortgageDaily.Com shows 聯The second lender-the one who is only financing 5% to 20% of the loan-doesn't see much benefit from lending the money unless he can actualize a high interest return. If the buyer borrows from the same financial institution Wholesale Frank Clark Jersey , they could open a home equity line of credit and withdraw two separate amounts; one amount for 80% of the loan and 20% for the 聯down payment聰.
The third option is to borrow the 20% part of the loan directly from the seller, also known as a purchase money loan. Kipplinger shows there is a down-side to the 80-20 loan. 聯You likely will have to pay a higher interest rate, buy private mortgage insurance (borrowers usually pay 20% of a home's value to avoid this) and make bigger monthly mortgage payments. Plus, it can be dangerous to be so highly leveraged. But in an expensive housing market Wholesale Jarran Reed Jersey , it can be the only way to afford a home.聰 Doug Duncan, chief economist of the Mortgage Bankers Association of America says, 聯Most banks offer special mortgages to low- and moderate-income borrowers because the Community Reinvestment Act requires financial institutions to provide a certain share of business to these economic groups. But no- and low-down options for jumbo loans (higher than $300,700) are harder to find.聰
The costs of the higher interest rate from the 80-20 mortgage are sometimes off-set because there is no mortgage insurance built into the loan. The State of California only requires mortgage insurance for all home loans exceeding 80% loan to value or LTV. An 80-20 loan allows the home-owner to step aside the insurance requirement Wholesale Germain Ifedi Jersey , thus having a lower monthly payment. If your goal of an 80-20 loan is to have a lower monthly mortgage payment, another option is the T.A.M.I. program. The T.A.M.I. program includes mortgage insurance where as the 80-20 program doesn聮t require mortgage insurance. Robin M. Root; a senior level loan officer says the T.A.M.I. provides lender-based mortgage insurance in exchange for a slightly higher interest rate. Since the IRS, allows a deduction for all interest paid for home loans, the cost of the mortgage insurance is tax deductible. And Wholesale Shaquill Griffin Jersey , unlike the 80-20 loan program, when the buyer has equity built up, the homeowner has the flexibility to open a home-equity loan for home improvements or cash emergencies.
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