What Is An 80-10-10 Or Piggyback Mortgage Loans

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What Is An 80-10-10 Or Piggyback Mortgage

Many Home Buyers Ask What Is An 80-10-10 Or Piggyback Mortgage And How This Powerful Tool Can Help Them Qualify To Make Their Home Purchase Happen

What is an 80-10-10 or Piggyback Mortgage?

  • A 80-10-10 or Piggyback Mortgage is a combination of a first mortgage and second mortgage
  • Home buyers are able to purchase a home where they could not qualify to make the home purchase due to the maximum loan limit of the first mortgage
  • There are many creative ways a mortgage loan on a home purchase can be structured
  • What Is An 80-10-10 Or Piggyback Mortgage Loans:
  • The two parts includes the first mortgage and a second mortgage
  • What Is An 80-10-10 Or Piggyback Mortgage:
    • So to take an example on an 80-10-10 mortgage on a $100.000 purchase price, the home buyer would put 10% of the $100.000 as their down payment
    • The home buyer would get a first mortgage of 80% of the $100,000 purchase price or $80,000
    • Then get a second mortgage of 10% of the $100,000 purchase price or $10,000 for the total of $100,000
  • This case scenario on What Is An 80-10-10 Or Piggyback Mortgage was used for simple math purposes and there is a reason why an 80-10-10 mortgages are done

What Is A What Is An 80-10-10 Or Piggyback Mortgage And Its Benefits

Piggyback Mortgage Loans is a slang for a second mortgage tied to the back of a first mortgage to be used at the same time for a home purchase.

  • To understand the term Piggyback Mortgage, you need to first understand the term
  • LTV, or Loan To Value
    • The Loan To Value is the amount of the first mortgage divided by the purchase price and/or market value of the property
  • For example, if you have a home worth $100,000 and first mortgage is $80,000, then if you take $80,000 divide that first loan amount by the market value of $100,000:
    • The Loan To Value is 80% LTV
  • However, if the first mortgage of $80,000 PLUS a second mortgage of $10,000, then adding both the first mortgage and the second mortgage which yields $90,000, the CLTV:
    • Or Combined Loan To Value is 90% CLTV
  • The second mortgage of $10,000 is called Piggyback Mortgage Loan:
    • On this case the the CLTV is the combination of the first mortgage plus the second mortgage

What Is An 80-10-10 Or Piggyback Mortgage Loans And Who Offers Piggyback Loans?

Many home buyers often call me to ask whether The Gustan Cho Team at Loan Cabin Inc. offers Piggyback Mortgage Loans.

  • Piggyback Mortgages are second mortgages used to Piggyback off the first mortgage on a home purchase.
  • Mortgage lenders do not offer Piggyback Mortgage Loans
  • However, many lenders such as myself will have sources of Piggyback Mortgage Lenders who are often banks and credit unions
  • Second mortgages on piggyback mortgages are portfolio loans
  • They are not regulated by any government sponsored enterprise such as Fannie Mae or Freddie Mac
  • Most Piggyback Mortgage Loans are held on the books of the lender
  • Gustan Cho Associates at Loan Cabin Inc. has selection of Piggyback Lenders who we partner with
  • Every Piggyback Mortgage Lender has their own lending requirements

Here are some general Piggyback Mortgage Loan Requirements depending on the Piggyback Mortgage Lender:

Minimum Credit Score Requirements:

Many Piggyback Mortgage Lenders will have minimum credit score requirements.

  • Just because borrowers qualify for a first mortgage does not necessarily mean they will qualify for a second mortgage
  • Some require a minimum of 620 FICO while others may require a 700 FICO minimum

Waiting Periods After Bankruptcy And/Or Foreclosure: When applying for a Piggyback Mortgage Loan, make sure that you find out what the minimum waiting period after a bankruptcy or foreclosure is before you start application process.

  • Some lenders may require 2 years after a bankruptcy:
    • While other Piggyback Lenders like TCF Bank has a 7 year waiting period after a Chapter 7 Bankruptcy discharged date
  • Some credit unions do not have any waiting period after a bankruptcy

Late Payments After A Bankruptcy And Foreclosure :

  • Late payments after a bankruptcy and/or foreclosure is viewed extremely negatively by all lenders
  • Most lenders will disqualify borrowers even with one late payment after a bankruptcy and/or foreclosure no matter what the circumstances are
  • Most Piggyback Mortgage Lenders will not approve you with late payments after a bankruptcy and/or foreclosure
  • Mortgage applicants who have any late payments after a bankruptcy and/or foreclosure and you need to qualify for a mortgage or Piggyback Mortgage Loan, please contact Gustan Cho Associates

If you are interested in obtaining a 80-10-10 mortgage with a Piggyback Mortgage, please contact us at 262-716-8151 or text for faster response. Or email us at gcho@gustancho.com.

Structuring A FHA Loan With An 80-10-10 Or Piggyback Mortgage

What Is An 80-10-10 or Piggyback Mortgage and how can a FHA Borrower benefit from it?

  • Unfortunately, FHA has reduced the maximum FHA Loan limits a couple of years ago from the maximum FHA Loan Limit to being $410,000 to $275,665 in most parts of the United States
  • FHA Loan Limits are higher than the traditional $294,515 maximum loan limits in many parts of the country
  • If it is classified as high cost areas like many counties in California, FHA Loan Limits is capped at $726,525
  • An 80-10-10 or Piggyback Mortgage will enable home buyers who are able to purchase a higher price home but is limited with the down payment they can put down on a home purchase and are restricted on the maximum FHA Loan Limit
  • Home buyers who can only qualify for a FHA Loan but need to get a higher priced home can make their dream of buying a higher priced home possible with an 80-10-10 mortgage loan program
  • In most areas in the United States, the maximum FHA Loan Limits is capped at $275,665 and Conventional Loans are capped at $484,350 If a borrower can only qualify for a FHA Loan and cannot qualify for a Conventional Loan
  • This is because they want to buy a higher priced home, then they can use the 80-10-10 mortgage loan program to make their home purchase happen
  • Here are the bullet points where Borrower can purchase a higher priced home with an 80-10-10
  • Mortgage where they would otherwise have no other options because they do not qualify for a mortgage:
    • FHA Loan Limits are at $294,515
    • Conventional Loan Limits are capped at $484,350
    • FHA and Conventional Loan Limits are substantially higher in high cost areas like many counties in California
  • There are many borrowers who qualify for FHA Loans but not Conventional Loans but can afford the monthly mortgage payments on loan amounts higher than $294,515
  • The 80-10-10 Mortgage is ideal to make their home purchase happen

Structuring A Jumbo Loan With An 80/10/10 Or Piggyback Mortgage

What Is An 80-10-10 or Piggyback Mortgage and how can a Jumbo Borrower benefit from it?

  • Home buyers who would not qualify for a Jumbo Mortgage will benefit from a 80-10-10 mortgage loan programs
  • Any mortgages that is higher than $484,350 loan amount is categorized in the Jumbo Loan classification
  • Jumbo lending requirements are much more stricter than Fannie Mae and/or Freddie Mac mortgage lending guidelines

Here are the basic Jumbo Mortgage Lending Requirements by most mortgage lenders:

  • Minimum credit score of 700 FICO
  • Maximum debt to income ratios of 40% DTI
  • No bankruptcy, deed in lieu of foreclosure, foreclosure, short sale in the past 12 years
  • One year reserves of principal and interest of their proposed new home purchase
  • No outstanding collection accounts, charge off accounts, late payments
  • Minimum 20% down payment on a home purchase

The main problem home buyers have is that they cannot come up with the 20% down payment on a Jumbo Mortgage. These home buyers can easily afford the monthly jumbo mortgage payment, however, they do not have the substantial down payment Jumbo Mortgage Lenders require so a 80/10/10 Mortgage would solve the problem because all the high end home buyer needs to come up with is 10% down payment.

What Is An 80-15-5 Or Piggyback Mortgage And What Are The Features Of A Piggyback Mortgage

Gustan Cho Associates Mortgage Group are experts in structuring 80-10-10. Mortgages for home buyers.

Here are some key features on a Piggyback Loan or 80-10-10 Mortgage:

  • Borrowers can finance up to a 90% CLTV of the home value:
    • What this means is you can have a first mortgage of up to 80% Loan To Value and a second mortgage of up to 10% or more and that will be your total mortgage amount as long as you put 10% down payment on a home purchase
  • Borrowers will not need mortgage insurance since first mortgage is 80% LTV: 
    • Since first lender will fund 80% LTV, no private mortgage insurance is required on Conventional Loans
  • FHA Loans will require mortgage insurance premium
  • Escrows are not required: 
    • Again, first lender will not require escrows because first position will only have a 80% Loan To Value
  • Conventional Loan In Lieu Of Jumbo Mortgage: 
    • Home buyers buying a higher priced luxury home can purchase their high end home loan with a Conventional Loan instead of a Jumbo Mortgage
    • Interest rates are much lower, down payment requirements are much less on Conventional Loans
    • There are no reserve requirements on Conventional Loans
  • Credit scores required by Jumbo Lenders may be as high as 740 FICO
    • With Conventional Loans, the minimum credit score requirements is at 620 FICO

Home buyers interested in learning more about What Is An 80-10-10  Mortgage and see if they qualify, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. The Gustan Cho Team at Loan Cabin Inc. is available 7 days a week, evenings, weekends, and holidays.

This BLOG On What Is An 80-10-10 Or Piggyback Mortgage Loans was UPDATED On November 29th, 2018

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