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

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

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this blog, we will discuss and cover what is an 60-10-10 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? An 80-10-10 or Piggyback Mortgage is a combination of a first mortgage and a 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 piggyback mortgage and/or combo mortgage. The overall mortgage loan is in two separate parts. The two parts include 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. In the next paragraph, we will do a case study on what is an 80-10-10 or piggyback mortgage.

Case Scenario On Piggyback Mortgages
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 80-10-10 mortgages are done.

What Are The Features of An 80-10-10 Piggyback Mortgage?

Piggyback Mortgage Loans are 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.

What Is Piggyback in Mortgage?

For example, if you have a home worth $100,000 and the 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. In this case, the CLTV is the combination of the first mortgage plus the second mortgage

Mortgage Lenders Who Offers Piggyback Loans?
FHA Guidelines On Income And Employment Gaps: Multiple Jobs In Past 2 Years

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 As Piggyback Loans

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 a selection of Piggyback Lenders who we partner with. Every Piggyback Mortgage Lender has their own lending requirements. Below, we will go over some general Piggyback Mortgage Loan Requirements depending on the Piggyback Mortgage Lender:

Minimum Credit Score Requirements on Piggyback Loans

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 Foreclosure on Piggyback Loans

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 the application process. Some lenders may require 2 years after a bankruptcy. While other Piggyback Lenders like TCF Bank have a 7-year waiting period after a Chapter 7 Bankruptcy discharged date. Some credit unions do not have any waiting period after a bankruptcy

Can You Qualify For Piggyback Mortgages With Late Payments After Bankruptcy And Foreclosure?

Late payments after a bankruptcy and/or foreclosure are 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 an 80-10-10 mortgage with a Piggyback Mortgage, please contact us at 800-900-8569 or text for a faster response. Or email us at gcho@gustancho.com.

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

What Is An 80-10-10 or Piggyback Mortgage and how can an FHA Borrower benefit from it? Unfortunately, FHA has reduced the maximum FHA Loan limit a couple of years ago from the maximum FHA Loan Limit to $420,680 in most parts of the United States. FHA Loan Limits are higher than the traditional $420,680 maximum loan limits in many parts of the country.

If it is classified as a high-cost area like many counties in California, FHA Loan Limits are capped at $970,800. An 80-10-10 or Piggyback Mortgage will enable home buyers who are able to purchase a higher-priced home but are 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 an 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 limit is capped at $420,680. Conventional Loans are capped at $647,800. If a borrower can only qualify for an FHA Loan and cannot qualify for a Conventional Loan, q piggyback loan may be the solution. This is because if 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
Bullet Points In Structuring Piggyback Mortgages

Here are the bullet points where the Borrower can purchase a higher-priced home with an 80-10-10. A mortgage where they would otherwise have no other options because they do not qualify for a mortgage. FHA Loan Limits are at $420,680. Conventional Loan Limits are capped at $647,200. 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 $420,680. 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 an 80-10-10 mortgage loan program. Any mortgage that is higher than the $647,800 loan amount is categorized in the Jumbo Loan classification. Jumbo lending requirements are much stricter than Fannie Mae and/or Freddie Mac mortgage lending guidelines.

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

The 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, a 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

Benefits of Low Down Payment on Piggyback Mortgages

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 an 80/10/10 Mortgage would solve the problem because all the high-end home buyer needs to come up with is a 10% down payment.

What Are The Features of An 80-15-5 Or Piggyback Mortgage
80-15-5 Or Piggyback Mortgage

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

Here are some key features of 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 a 10% down payment on a home purchase

Borrowers will not need mortgage insurance since the first mortgage is 80% LTV: 

  • Since the 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, the first lender will not require escrows because the first position will only have an 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 requirement is 620 FICO

Home buyers interested in learning more about What Is An 80-10-10  Mortgage and seeing if they qualify, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

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