What Is An 80-15-5 Or Piggyback Mortgage

Many Home Buyers Ask What Is An 80-15-5 Or Piggyback Mortgage And How This Powerful Tool Can Help Them Qualify To Make Their Home Purchase Happen

What is an 80-15-5 or Piggyback Mortgage? A 80-15-5 or Piggyback Mortgage is a combination of a first mortgage and second mortgage where a home buyer is 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. An 80-15-5 mortgage is often called a piggy back mortgage and/or combo mortgage where the overall mortgage loan is in two separate parts. The two parts includes the first mortgage and a second mortgage. So to take an example on an 80-15-5 mortgage on a $100.000 purchase price, the home buyer would put 5% 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 and get a second mortgage of 15% of the $100,000 purchase price or $15,000 for the total of $100,000. This case scenario was used for simple math purposes and there is a reason why an 80-15-5 mortgages are done.

What Is A Piggyback Mortgage Loan?

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 your first mortgage is $80,000, then if you take $80,000 divide that first loan amount by the your market value of $100,000, your Loan To Value is 80% LTV. However, if you have a first mortgage of $80,000 PLUS a second mortgage of $15,000, then if you add both the first mortgage and the second mortgage which yields $95,000, your CLTV, or Combined Loan To Value is 95% CLTV. The second mortgage of $15,000 is called your Piggyback Mortgage Loan on this case the the CLTV is the combination of your first mortgage plus your second mortgage.

Who Offers Piggyback Mortgage Loans?

Many home buyers often call me to ask whether The Gustan Cho Team at CrossCountry Mortgage NMLS 3029 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 mortgage lenders such as myself will have sources of Piggyback Mortgage Lenders who are often banks and credit unions. Piggyback mortgages are portfolio loans and 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. I have a selection of Piggyback Mortgage Lenders who I partner with and 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. 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 your 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.
  • Lates After A Bankruptcy And Foreclosure : Late payments after a bankruptcy and/or foreclosure is viewed extremely negatively by all mortgage lenders. Most lenders will disqualify you 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 lates after a bankruptcy and/or foreclosure. If you 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 at The Gustan Cho Team at CrossCountry Mortgage NMLS 3029 at gcho@gustancho.com. I may be able to help you.

If you are interested in obtaining a 80-15-5 mortgage with a Piggyback Mortgage, please call Gustan Cho at 262-716-8151 or email Gustan Cho at gcho@gustancho.com.

Structuring A FHA Loan With An 80-15-5 Or Piggyback Mortgage

What Is An 80-15-5 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 $271.050 in most parts of the United States. FHA Loan Limits are higher than the traditional $271,050 maximum loan limits in many parts of the country where it is classified as a high cost area like many counties in California where the FHA Loan Limits is capped at $625,500.

An 80-15-5 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 80-15-5 mortgage loan program. In most areas in the United States, the maximum FHA Loan Limits is capped at $271.050 and Conventional Loans are capped at $417,000. If a borrower can only qualify for a FHA Loan and cannot qualify for a Conventional Loan because they want to buy a higher priced home, then they can use the 80-15-5 mortgage loan program to make their home purchase happen. Here are the bullet points where a FHA Borrower can purchase a higher priced home with an 80-15-5 Mortgage where they would otherwise have no other options because they do not qualify for a mortgage:

  • FHA Loan Limits are at $271,050 where Conventional Loan Limits are capped at $417,000. 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 $271,050. The 8-15-5 Mortgage is ideal to make their home purchase happen.

Structuring A Jumbo Loan With An 80/15/5 Or Piggyback Mortgage

What Is An 80-15-5 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 80-15-5 mortgage loan programs . Any mortgages that is higher than $417,000 loan amount is categorized in the Jumbo Mortgage Loan classification. Jumbo Mortgage 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 80/15/5 Mortgage would solve the problem because all the high end home buyer needs to come up with is 5% down payment.

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

Gustan Cho NMLS 873293 and The Gustan Cho Team at CrossCountry Mortgage Inc. NMLS 3029 are experts in structuring 80-15-5 Mortgages for home buyers. Here are some key features on a Piggyback Loan or 80-15-5 Mortgage:

  • Borrowers can finance up to a 95% 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 15% or more and that will be your total mortgage amount as long as you put 5% down payment on a home purchase.
  • Borrowers will not need mortgage insurance since first mortgage is 80% LTV: Since your first mortgage 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, your first mortgage lender will not require escrows because your 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 where interest rates are much lower, down payment requirements are much less on Conventional Loans, and there are no reserve requirements on Conventional Loans.
  • Credit scores required by Jumbo Lenders may be as high as 740 FICO where with Conventional Loans, the minimum credit score requirements is at 620 FICO.

If you are interested in learning more about What Is An 80-15-5 Mortgage and see if you qualify, please contact Gustan Cho at CrossCountry Mortgage Inc. NMLS 3029 at 262-878-1965 or email Gustan Cho at gcho@gustancho.com. You can also text Gustan Cho’s cell at 262-716-8151 for faster response. The Gustan Cho Team at CrossCountry Mortgage is available 7 days a week, evenings, weekends, and holidays. CrossCountry Mortgage NMLS 3029 is a five star full service Fannie/Freddie/GINNIE MAE direct lender licensed in 50 states and headquartered in Brecksville, Ohio with branches and loan officers nationwide and known for its 21 day loan closings and no lender overlays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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