If you have been putting off purchasing your home because you cannot afford the down payment, there are options available to you to help you secure financing. One of these options is the so called “piggyback loan,” also referred to as an 80/20 mortgage. Here are the basics you need to know to help you secure the financing you need without overpaying for it.
Most traditional lenders require a 20 percent down payment in order to purchase a home. For some people with a limited cash flow, this down payment prevents them from owning their home. There are lenders that will finance you without a down payment; however, you may be required to purchase Private Mortgage Insurance, and this expense could add hundreds of dollars to your monthly payment amount. Private Mortgage Insurance (PMI) protects mortgage lender from certain losses due to foreclosure. PMI does nothing for the homeowner except drive up the monthly payment amount.
Piggyback mortgages allow you to borrow without a down payment and avoid paying private mortgage insurance. Sometimes referred to second trust loan, these mortgages are typically structured as two loans from different lenders. The 80/20 option means you will take out a mortgage for 80 percent of the home purchase from one lender, and the remaining 20 percent from a second lender.
When you take out a piggyback mortgage, the interest rate on the 20 percent loan will be higher because that lender assumes greater risk for the loan. You can learn more about your mortgage options, including costly mistakes to avoid, by registering for a free mortgage guidebook.
To get your free mortgage guidebook visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
Claim your free guidebook today at: http://www.refiadvisor.com
