80/20 mortgage products are also described as combination financing or piggyback loans and offer a convenient way to provide creative financing in a purchase, refinance, or debt consolidation transaction. In an 80/20 mortgage purchase transaction, a second trust or mortgage is frequently used in combination with a first mortgage to avoid paying Private Mortgage Insurance or PMI. The firs mortgage is always set at 80% of your purchase price which eliminates the need for PMI. We add a second mortgage of 20% of the purchase price or value. There are actually two versions of this 80/20 mortgage program offered by several lenders. The 80/20 mortgage first will require you to have 3% cash in the transaction (covering your closing costs) and the second 80/20 mortgage requires no cash at all. I have had many clients close there 80/20 mortgage transaction with no cash by having the seller pay all of their closing costs. Several 80/20 mortgage programs will now allow combined loan amounts up to $650,000 and again, NO Mortgage Insurance! Email questions on your 80/20 mortgage
You have a wide range of mortgage options on this 80/20 mortgage, including fixed rate or 80/20 mortgage arms. Also, 80/20 mortgage interest only products are often available as well. Several advantages to consumers using this approach include:
However, there are some potential problems with the strategy.
Second Trust RatiosA second trust is a loan secured by your property which takes second position to the first loan. A second trust usually carries a fixed interest rate for the life of the loan and amortization periods range from 5 to 20 years with a great new product amortized over 30 years with a balloon due in 15 years. The longer amortization period lowers your monthly payment significantly. Generally, your total debt ratio should not exceed 45% of your monthly pretax income. Depending on credit scores, an interest only 80/20 mortgage HELOC may also be available to you as well
Several of our lenders are now offering interest only options which can often lower your payment or allow you to purchase more house. I have a rather extensive section detailing these new Interest only loan options.
I have included a page on how to calculate your 80/20 mortgage qualification ratios.
We offer you the ability to qualify and close into several unique programs which accommodate borrowers with non traditional income or asset situations. Please visit my No Documentation loans page for additional information on a No Documentation Second Trust.
Read more about 80/20 Mortgage Closing Costs
I have an article "Buying your home in 2008" by email explaining negotiating strategy in today's market.
If you have had credit issues in the past, it is absolutely critical in today's market that they be addressed before you try to get a mortgage. I have referred my clients to CreditFX for the past 5 years. Exceptional customer service and I am often stunned at what they have been able to have removed from people's reports, allowing my clients to qualify. Their charge of $199 is one of life's true bargains.
As a Certified Mortgage Planning Specialist, I offer an analysis of your situation today can make suggestions on how small changes in how your debt is structured today can have a life changing effect in the years to come. Read more about this free, no obligation service.
Prequalify for your 80/20 Mortgage.