When applying for a mortgage loan, down payments are generally required
as part of the financing. Many traditional mortgages will only finance
80 percent of the home price. Thus, homebuyers are obligated to provide
the additional 20 percent. Having a down payment of 20 percent is ideal
in a perfect world. In reality, few people have access to this type of
money. For this reason, mortgage lenders are offering 80/20, or
piggyback mortgage loans.
How Do 80/20 Home Loans Work?
The concept around 80/20 home loans is very simple. Ordinarily, if a
homebuyer did not have a down payment of 20 percent, they would have to
purchase private mortgage insurance, (PMI), to complete the home
financing. On average, PMI increases mortgage payments by $100.
If accepting an 80/20 home loan, PMI is not required. Instead,
homebuyers receive two loans to finance the home purchase. A first mortgage is
approved to finance 80 percent of the home cost, whereas a second
mortgage or home equity loan is approved to finance the remaining 20
percent.
Who Qualifies for an 80/20 Home Loan?
Any homebuyer hoping to avoid private mortgage insurance may qualify
for an 80/20 option. Piggyback loans are especially beneficial for first
time homebuyers. Young couples will also benefit from these loans.
Usually, these individuals have not been able to build a large cash
reserve. This way, they do not have to put off buying a home.
An 80/20 home loan is also offered to individuals with poor credit.
Mortgage lenders vary in their loan qualification guidelines. Traditional
lenders such as banks, credit unions, and mortgage companies prefer
applicants that have a high credit rating. Thus, they may not approve loan
requests for credit scores that fall below 640.
On the other hand, many lenders offer a range of bad credit mortgage
loans. These consist of loans that provide assistance for down payments,
closing costs, low mortgage rates, etc.
Applying for an 80/20 Loan with Bad Credit
Try using one of ABC Loan Guide's
Recommended No Down Payment Mortgage Loan Lenders.
Mortgage brokers are very effective with helping bad credit applicants
find a fitting home loan program. To smooth the process, brokers have
websites available, which offer explanations on various bad credit home
loans. Moreover, you can request a mortgage quote online, and receive
up to four offers from different lenders granting piggyback loans to
people with bad credit.
View our recommended lenders for
Bad Credit Mortgage Loans. Also, view our recommended sources for a Free Credit
Buruea Report.
