What Is An 80-10-10 Or Piggyback Mortgage Loans
This Article Is About What Is An 80-10-10 Or Piggyback Mortgage Loans
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
Piggyback Mortgage Versus Jumbo Loans
What Is An 80-10-10 Or Piggyback Mortgage Loans:
- An 80-10-10 mortgage is often called a piggy back mortgage and/or combo mortgage
- The overall mortgage loan is in two separate parts
- The two parts includes the first mortgage and a second mortgage
- Jumbo borrowers can get much better mortgage rates if they choose a piggyback 80-10-10 versus Jumbo Mortgages
On the next paragraph, we will do a case study on what is an 80-10-10 or piggyback mortgage.
Case Scenario On Piggyback Mortgages
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 Gustan Cho Associates 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 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 [email protected]
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 $331,760 in most parts of the United States
- FHA Loan Limits are higher than the traditional $331,760 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 $765,500
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.
Piggyback Mortgages Versus Jumbo Loans
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 $331,760
- Conventional Loans are capped at $510,400
- If a borrower can only qualify for a FHA Loan and cannot qualify for a Conventional Loan, q piggyback loan may be the solution
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.
Bullet Points In Structuring Piggyback Mortgages
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 $331,760
- Conventional Loan Limits are capped at $510,400
- 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
- These borrowers can afford the monthly mortgage payments on loan amounts higher than $331,760
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 $510,400 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 to get a second mortgage at most banks:
- 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 a faster response. Or email us at [email protected] Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.