80/20 loans are also described as combination financing or piggyback loans that include 1st and 2nd mortgage loans that close concurrently. 80-20 home loans offer a convenient way to provide creative financing in a purchase, refinance, home improvement, or debt consolidation transaction. In a purchase transaction, a second trust is frequently used in combination with a first trust to avoid paying Private Mortgage Insurance or PMI. The first trust is always set at 80% of your purchase price which eliminates the need for PMI. We add a second trust of 20% of the purchase price or value. There are actually two versions of this program offered by several lenders. The first will require you to have 3% cash in the transaction (covering your closing costs) and the second requires no cash at all. I have had many clients close there transaction with no cash by having the seller pay all of their closing costs. Several programs will now allow combined loan amounts up to $500,000 and again, NO Mortgage Insurance!
Like many of the bad credit mortgage products, the 80-20 loans have been put on hold. With the alarming rise in defaults and foreclosures, most lending sources simply don't want to take the risk any more.
Smart Home Mortgage Loans also offers several piggy-back loan alternatives, like the FHA home loan to 97% and the Freddie MAC 100% financing option as well.
100% Home Financing Appealing as Rental Unit Affordability Gets Worse Nationwide
According to the Dow Jones, the average hourly wage needed to pay for a two-bedroom apartment rose to $16.31 in 2006, up from $15.78 last year, according to the "Out of Reach" report published annually by the National Low Income Housing Coalition. 100% home financing is rising in loan application volumes as the cost of renting continues to rise. The most expensive home market in the country for renters is Stamford/Norwalk, Conn., where a worker must earn $30.62 per hour to be able to afford a two-bedroom apartment. The next three priciest markets are in California, with San Francisco costing $29.83, Orange County at $28.56, and Oxnard-Thousand Oaks-Ventura at $28.29.
The top five priciest states and territories are Washington, D.C., where a renter must earn $24.73, followed by $23.53 in Hawaii, $22.86 in California, $22.65 in Massachusetts, and $21.21 in New Jersey. Puerto Rico was the most affordable with an $8.83 hourly wage needed to afford a two-bedroom apartment. West Virginia was next at $10.10, followed by North Dakota at $10.33, Arkansas at $10.40, Alabama at $10.55, and Mississippi at $10.65. As a result, many mortgage lenders are offering 80-20 home purchase loans that are available for first time home buyers.