Profile picture for MitsyHunter

Does anyone off the 80/20 split loan anymore?

I got this kind of loan a few years ago, and it was super easy. Are these available anymore?
  • July 03 2013 - Ballard
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Answers (8)

Hi Mitsy,

No 2nd mortgage lender in our area goes higher than 90% (80% 1st mortgage, 10% 2nd mortgage), and only a handful go that high.  Most still cap the 2nd to 85% or even 80%.

If you need a program with little to nothing down, and if 100% one-loan programs like USDA Rural Development loans or VA loans are not possible, then if you are a first-time home buyer, you might qualify for your state's bond loan program where a grant is made to cover the down payment.  For example, TN's bond loan program is called the THDA program (TN Housing Development Agency) and it provides up to a 4% grant that would cover the FHA required 3.5% down payment requirement.

If however, you are not a first time homebuyer (i.e. if you've owned real estate in the past 3 years), then you're looking at either an FHA loan with 3.5% down, where the down pmt can come from you or family members, or a conventional loan with just 3% down. Many lenders don't offer this 3% down conventional program, but there should be some in your area who do.  A lot of lenders still only quote the traditional 5% down conventional loan option.

To qualify for the 3% down conventional loan, you need to have higher scores (typically 700 or 720, depending on the lender), 2 months' worth of mortgage payments in "reserves", and your down payment must come from your own funds, not a gift.  Monthly mortgage insurance (PMI) with this program is a lot cheaper than FHA's, and even though this loan may have a higher interest rate than an FHA loan, the monthly mtg insurance more than offsets that.  Plus, the PMI can eventually come off the loan, whereas with FHA, it's for the life of the loan now (since June 2013). For the right borrower, it really can make a lot of sense.
  • August 08 2013
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Hi Mitsy!

The only possible way of closing an 80/20 loan is if the second lender is willing to do a simultaneously close at the same time your new 1st mortgage closes, which is possible, but the terms on the 20% loan would be very unattractive, even with perfect credit (rates are between 6%-12%).  However, you do have an option to do an interest only variable rate on the new second which would be based on the prime index, as long as you have superior credit (above 740+).

With that said, you may want to consider a 3% down payment option (or 3% equity if this is a refinance) with no private mortgage insurance.  The requirements for this product is to be above a 700+ qualifying credit score (Experian, Equifax & TransUnion give you three different mortgage qualifying credit scores and the middle score is your qualifying credit score used to apply for a loan).  The other requirement is that your new loan amount is at or below $417,000 which is typically the price range you will see in Ballard if that is the area you are looking in.  (I've been living and working here in Ballard for over five years now.)  This program would allow you to have a maximum purchase price of $430,000.

Keep in mind that most retail banks or direct lenders do not offer this program and are limited to 90% LTV Conventional or 96.5% LTV if you choose to go FHA and pay a monthly FHA mortgage insurance premium.  If you or if you have a spouse that was a Veteran, you may qualify for a VA 100% no money down purchase or a 100% rate and term or cash out refinance.

This program is offered on the wholesale lending side so it is highly advantageous for you to work with a company that does both direct lending and wholesale lending so you get offered all programs at the most competitive rates and terms.

Please contact me through my profile if you'd like to discuss this further.

- John
  • August 07 2013
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Yes.  We have an 80/20 purchase loan.  Please contact me through my profile and I'd be happy to go into more detail.
  • July 17 2013
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Profile picture for daveskow
No ....need to use  80/10/10  approach  or  fha loan with 3.5% down or conventional  loan with 5% down
  • July 04 2013
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That would be a negative. However, there are 100% loans with USDA and VA.  You can check on USDA's website for eligible areas and income qualifications. 
  • July 03 2013
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Profile picture for nwhome.us
As in 20% down?

What's a 80/20 split?
  • July 03 2013
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Profile picture for Frank McKnew

Not anymore.

  • July 03 2013
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No.
  • July 03 2013
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