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Guest

Hi, I'm thinking of buying home in a community in Oregon. The mortgage company that I've spoken to suggested a loan which would have two parts – 80% of the home value and the other 20% - never heard of this! And then they say there's no down payment involved. But can I pay off the second loan first and is it true that I'll end up paying lots more in the long run, someone told me about this and I'm scared to go for it. Would you pls explain it to me and let me know if it's a good idea

jenkin7 · Posted: Thu Jun 21, 2007 4:21 am Post subject:

Hello Nathan,

An 80/20 mortgage is basically a combination of 2 home loans that equals the total amount of the purchase price. The first mortgage being 80% and the second mortgage being 20%. An 80/20 mortgage loan works comfortably for first-time buyers when there isn't a large down payment and you want to avoid paying PMI (Private Mortgage Insurance).

To know more about 80/20 loan, refer to such discussions at http://www.mortgagefit.com/discuss/80-20loan.html

Guest

Hello Nathan,

80/20 mortgages are normally called as piggyback loans or 100 % financing, that allows the borrower to buy a home by taking out two loans - one for 80 % of the purchase price and one for the remaining 20%. And, he does not have to make a down payment or pay private loan insurance.

The interest rate on the second mortgage loan is higher than the interest rate of the first loan. Now, it is up to you to pay the interest keeping aside cash to take care of the other needs that you my have. 80/20 loans are best for first-time buyers who cannot afford to come up with a down-payment.

blue · Posted: Thu Jun 21, 2007 3:01 pm Post subject:

Hi Nathan,

Welcome to Mortgagefit discussion board.

If you can make the required down payment then you will not have to select a combination of two mortgages. There are many loan programs in which the required down payment is 5-3%, like fha loans which have 3% down requirement. How much is the price of the house you are planning to purchase?

You can calculate for yourself how much you can afford as a down payment on that house and what is the amount that will be required based on the 20% calculation.

I you have other options open then do not go for an 80-20 loan as for the second loan which represents 20% of the purchase value the rate will be higher than normal. Go for a single loan as nowadays there are programs which require very less down payment requirements as I mentioned earlier.

Do let me know if you have any other questions.

Thanks
Blue

Guest

thanks all for you advice. the price is $200000. it's not that i cannot make a down payment - i could at least make 10% of it. what i've heard about is a home buying seminar is good for fist timr buyers. is that so, i mean do i have to pay a fee to attend it. I'm not into getting a lot of knowledge in mortgage but just the bit that would really help me in the process -i mean i hear people getting into debt and losing their homes, falling into high fee trap and what not - just to make sure that i'm not one of them

jenkin7 · Posted: Fri Jun 22, 2007 2:28 am Post subject:

Hello Nathan,

Home buying seminars are beneficial for the first time buyers because it gives you lot of information regarding homes. They provide knowledge about the various programs that are associated with the purchase. They also help you to understand whether purchase is a good option or not. In a gist, they are basically informative.

There are various places where the seminars are held free of cost, like Provident Credit Union, Capital Access Mortgage and so on.

miller_st · Joined: 17 Jan 2007 Posts: 918 168.95 Dollars($)

Nathan if you are in a position to make a down payment then you do not have to go for a 80-20. There are many no down payment or very less down payment mortgage programs like the fha loans & mycommunity loan of fannie mae.

See if you would qualify for them.

Miller

Niicss · Posted: Sat Jun 23, 2007 6:37 pm Post subject:

Fha has 3% down requirement, and relaxed credit profile required to qualify.

Discuss with your mortgage company if you can qualify for it.

While fannie mae program that miller mentioned can be for 100% ltv.

What reason did your mortgage company provide to suggest you would require 80-20 loan? Did you tell them that you can make 10% down?

Guest

I will go with other posters who have the opinion that a single loan will be better for you.

The reason is that for a 80-20 loan the 20 one would have higher rates. You will also have to manage to loans instead of just one which sometimes can complicate matters.

Guest

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Buying home in Oregon - Is 80/20 loan a good idea?