Using A Second Mortgage For An 80 20 No Money Down Home Purchase Loan

Using A Second Mortgage For An 80 20 No Money Down Home Purchase Loan



Using a​ Second Mortgage for an​ 80-20 No Money Down Home Purchase Loan
Many renters want to​ own their own home,​ but they simply don’t have the​ down payment to​ make the​ purchase .​
If you’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,​ 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 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,​ 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​ down payment .​

The third option is​ to​ borrow the​ 20% part of​ the​ loan directly from the​ seller,​ also known as​ a​ purchase money loan .​
Kipplinger.com shows there is​ a​ down-side to​ the​ 80-20 loan .​
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,​ it​ can be the​ only way to​ afford a​ home.
Doug Duncan,​ chief economist of​ the​ Mortgage Bankers Association of​ America says,​ 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.
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,​ 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’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,​ 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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