80/20 Mortgages help avoid PMI
How much better are 80/20 mortgages?
Most consumers today look at the 80/20 mortgage option simply because it affords them the luxury of purchasing a home with almost no money down. So, if your credit scores are strong, but have limited funds to commit to putting down on a new home purchase, then an 80/20 mortgage is just right for you. Not only will this program save you thousands on the money required as a down payment, it will also prevent you from having to pay that awful PMI Insurance. If you are qualifying for a FHA, VA, Fannie Mae or Freddie Mac mortgage, then they all require PMI when borrowing more than 80% of the property value. A down payment is usually between 3% and 20% of the total cost of the home. The amount of the down payment depends on your credit history, income, the cost of the home, and the type of mortgage you choose.
Lets us define what an 80 20 mortgage really is. It's 2 loans that are combined that total 100% of the purchase price. Your first mortgage is 80% of the purchase price and the second mortgage is the remaining balance which is 20% of the remaining purchase price. In most cases, the second mortgage is usually a fixed mortgage or a home equity line of credit. If you are considering doing the 80/20 mortgage, you can compare multiple mortgage quotes to see which loan product will save you the most money.
In fact, most online mortgage lenders are willing to give consumers what’s called a piggyback loan, or an 80/20 mortgage, to avoid charging them PMI. This is accomplished by giving borrowers a first mortgage for 80% of the value of the property, then a second mortgage better knows as (a home equity loan) for the remaining 20%, which avoids PMI insurance. The benefit of this program still helps the borrower, because the interest on most second mortgages are tax-deductible while paying PMI is not.
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