There are several home loan options available to home buyers in today's market. For many, putting 20% down on a property is not an option, so many home buyers have to look for loan programs that wish less than 20% down. These loan programs will wish incommunicable mortgage insurance also known as Pmi. The mortgage insurance increases the monthly mortgage payment, but for some people, there is someone else option as well.
Some people will consider adding a second mortgage loan. These loans are also called piggy back seconds or purchase money seconds. The benefit of a second home loan is a reduced down payment, no mortgage insurance, and in most cases a reduced total monthly house payment.
Reduced Down Payment
By adding a second home loan, you are able to have a lower down cost and still avoid mortgage insurance. In order to avoid mortgage insurance, a person must put down 20%, but with a second mortgage loan, you are absolutely in a sense borrowing a portion of the down payment. Second home loans usually help the client put as limited as 5-10% down on a new home.
This is where the term 80/10/10 or 80/15/5 comes from. The numbers record the loan-to-value ratio compared to the purchase price of the home. The first estimate is the first mortgage which is usually 80% of the sales price. The second estimate is the second loan and the final estimate represents the down payment. For example, if a buyer purchases a house for 0,000 and does an 80/15/5 loan program, then the first mortgage would be for ,000, the second loan would be for ,000 and the down cost would be ,000.
No Mortgage Insurance
By splitting the home loans into two, mortgage insurance is avoided. This can save the homeowner hundreds of dollars a year.
Lower Monthly Loan Payment
For the most part, the monthly mortgage cost is lower when you split the mortgages into two separate mortgages. Keep in mind though, that the second loan will have a higher rate.
Getting beloved For A Second Or Piggy Back Loan
In order to split the mortgages, you must get beloved for a second loan. Second lien fellowships have tougher mortgage guidelines and usually wish a credit score of at least 700. Also, the maximum debt-to-income ratio for the purchase cannot surpass 45%.
Finally, several second lien lenders will not do a second mortgage for a first time home buyer. Also, some loan programs, like Fha home loans, do not allow a second lien at time of purchase.
Not every person will have the potential to split their mortgage loans at time of purchase, so it is important to discuss with your loan consultant all your options when it comes to purchasing a new home.
Save Money With A purchase Money Second Home Loan And Avoid underground Mortgage assurance