Using an 80 20 Mortgage to Avoid Mortgage Insurance

An 80 20 mortgage is also called a zero down loan or no money down loan. It is actually two loans, a regular home mortgage which constitutes 80% of the price of the home and a second mortgage or home equity loan that consists of 20% of the cost of the house. The idea behind this type of loan is avoiding mortgage insurance (PMI) by using the home equity loan as the down payment.

Just about all mortgages require some form of mortgage insurance if you are unable to make a down payment of at least 20 percent. By obtaining a second mortgage or home equity loan for 20 percent of the homes cost you can circumnavigate this requirement by using that second loan as the down payment.

There are variations of this type of mortgage such as an 80-15-5 loan. This means that the borrower got a main mortgage of 80 percent of a home's purchase price, a piggyback loan for 15 percent, and made a 5-percent down payment. This can be a good option if you have some money for a down payment but not enough to cover the entire 20%.

The second mortgage can either be a fixed second mortgage or it can be a line of credit. If it is a fixed second mortgage then the interest rate is normally fixed for the entire length of the mortgage. Most fixed second mortgages are a 30 due in 15 which means that the second mortgage is amortized over 30 years, but is due in 15 years. The benefit of going with the line of credit as the second mortgage is that the interest rate is normally much lower than the fixed second mortgages rate. They can also be an interest only loan which could save you hundreds of dollars in mortgage payments every month.

The 80 percent first mortgage can be a fixed-rate (15-year or 30-year), adjustable-rate (usually 5/1, 7/1 or 10/1fixed period ARM) or interest-only loan. Typically, the interest rate on the second mortgage loan is higher than the interest rate of the first loan. But because the borrower doesn't have to pay mortgage insurance, the overall cost is less than a traditional mortgage even with the higher mortgage interest rate on the second loan.

Plenty of mortgage programs allow borrowers to buy houses with little or no money down, but they usually require private mortgage insurance, or PMI. Getting an 80 20 mortgage can be a good way to avoid the extra cost that PMI will add to your monthly payments.

Home Mortgages 101: A Must-Read for First-Time Home Buyers!

Home Mortgages 101: A Must-Read for First-Time Home Buyers!
One of the most important parts of manifest destiny and the American dream is home ownership. Owning your own home can be a very smart investment decision since prices tend to increase faster than the inflation rate, and now, with the recession dropping home prices and interest rates to their lowest in the last decade, there isn't a better time to buy! Because of the current market timing and the fact that it's a widely known as a smart investment, now is the time to start considering the idea. Before you rush out, call a realtor and start looking for a house, you should start by seeking out the perfect mortgage for your budget.

All potential homeowners should take some time to research home loans before calling their local Realtor. There are a dazzling array of choices available when it comes to home loans, and finding the right mortgage for your needs can be difficult. Approach your upcoming home purchase with the same seriousness you apply to other major purchases. Your home will most likely be the biggest single investment you ever make. Take the time at the beginning to educate yourself about home loans. It will be time well spent.

To begin your home mortgage search, talk to credit unions, banks, and brokers in your area. You're looking for someone to hold your hand through the process, but you also want a decent rate with low fees, so make sure to shop around.

When you're looking at rates, you will be shown two different types - variable/adjustable rate (ARM) and fixed rate. The ARM rate is usually shown as a promotion at a cheap rate, sometimes called a "teaser." After the fixed period of the ARM is up, you can expect rates to rise significantly if you get into one of these adjustable rate mortgages.

ARMs have two specific things you look for to use in your analysis - when the rate adjusts (anywhere between one month to 10 years) and what the cap on the interest rate is. Usually, the rate will adjust to whatever the prime rate (the federal government chooses this number) is at the time of the adjustment, plus a certain percentage of 'mark-up' that pays the bank. When you discover the rate cap, use a mortgage payment calculator to find out how much your maximum monthly payment is, worst case. That's not to say your mortgage will actually adjust to that rate, but it's a prudent idea to plan for different scenarios - including worst case.

Variable rate home loans can be a good choice if you believe interest rates are likely to fall. In an environment where interest rates are steady or rising, they may not be so good a choice. You may also want to consider a variable rate mortgage if you do not plan to stay in your home more than five years. For instance, if your job transfers you every couple of years, you could probably get away with a variable rate mortgage and take advantage of the lower interest rate. When you move and sell your home, you will probably realize a gain due to rising home prices.

On the other hand, fixed rate home loans have a set interest rate for a set period of time, generally either 15 or 30 years. The interest rate does not change, therefore you will always know what your monthly mortgage payment will be. You are protected from rising interest rates with a fixed rate mortgage. If rates fall significantly, you can always refinance your mortgage loan to take advantage of the lower rates.

Your mortgage term, or length, is another deciding factor of how much interest you'll end up paying. With a longer term, you'll pay more interest since your loan is amortized over more years - creating more compound interest. If you need the flexibility to make smaller payments by taking on a longer mortgage term, you can always pay more toward your principal at any time to help reduce the length of the loan. Just by paying a few extra principal payments/year can save you tens of thousands of dollars in interest!

Whatever type of home loan you decide on, the most important thing is to take that step which transforms you from a mere renter to a home owner and builder of equity. There are a great many home loans out there, but once you find the right one, you will find the rewards of home ownership well worth the time and effort put forth.

Selecting a Home Mortgage in present Market

Even in a normal economic environment, getting a mortgage loan can prove to be very taxing on one’s nerves and time. First of all you have to find a house, then you need to fill out a huge loan application, you gather up all the required paperwork, you talk to your loan consultant several times during the process to assure that everything is going ok and the loan may still not be approved.

And that happens when everything is going fine with the economy, not like what’s happening nowadays. Due to the economic crisis mortgage lenders are becoming increasingly restrictive when it comes to doing what they do, the biggest reason being that Fannie Mae and Freddie Mac require governmental financial assistance to stay afloat.

When the largest companies in the field require bailouts this start a trickle-down effect, meaning that Fannie Mae and Freddie Mac will be more restrictive with the mortgages that they purchase and as a result the companies that sell their loans to Fannie and Freddie become more restrictive with their clients.

The government is highly invested in keeping Fannie and Freddie working because if these two companies go down, then the entire mortgage industry breaks down, hence the bailout which ensures that there will still be money available to those who want to purchase a home or refinance their existing loan.

If you find yourself in the market for a loan in Denver or any other city in the U.S., the first thing that you need to do is, even in this current economic troubles, shop around however not the sort of shopping around that you used to do. It used to be that shopping around for a loan meant that you were looking for a low
rate, but now you’re in fact looking for a mortgage company that will approve your loan application. By doing this you’ll become more knowledgeable about the local market and be able to determine what the average rate and closing costs should be for the loan that you’re looking for, and also this will mean that you’ll have a good stock of lenders to apply to if your chosen company doesn’t approve your application.

You should also consider local credit unions and banks, while it is true that they used to have higher rates than most specialized credit companies, the economic downturn has made them lower their rates and offer competitive prices. Even so you’ll still need to qualify for the loan and it may be under stricter guidelines, but going this route may also offer lower fees on your contract, as well as offer you lower fees on savings and checking accounts that you keep with them.

The government wants to ensure, through the bailouts, that Freddie and Fannie are capable of purchasing mortgage loans from mortgage lenders, and even though the mortgage economy is a small fraction of the overall wealth of the United States it is a very important one, this means that there will be more regulation and increased scrutiny all across the board. You’ll still be able to get loans but the important thing that you need to do is to shop around and look at all the alternative ways of financing your home so that you can be sure that your loan will close.

Regardless of what your goal is, whether you’re thinking of buying a home or you want to refinance your current loan, by doing a little bit of research and looking into your local market you’ll get important and maybe even crucial insight into what your choices are, and what you can do with them, so take your time and make the right choice. By Bill Marinelli

Bill marinelli is the owner and operator of Denver's Paramount Home Loans.

Mortgages – 3 Important Factors

When buying a home for the first time, a mortgage can seem like a daunting thing that you don't understand. Here is some basic mortgage terminology that you need to know in order to make an informed decision.

Term - A mortgage term is the length of time you have to pay off your loan. It could be anywhere from 10 years to 30 years. Like any loan, the longer you have to pay off your mortgage, the lower the payments will be. An important mortgage tip - in some cases, the shorter the term, the lower the interest rate.

Rate - The "rate" is the interest rate, which basically defines how much you will be paying the bank to borrow money from them. The interest rate offered to you is dependent on your credit rating, how much money you are able to put down, how much money you make and the value of the home you're buying. Rates can also change depending on the loan program.

Cost - Costs typically refer to closing costs, which are a part of every mortgage. You may see offers for "No Closing Costs" but these programs are rare. If you get a no closing cost loan, it usually means the mortgage company is making a large enough commission on your loan to cover the closing costs for you. Closing costs usually include an appraisal, recording fees on documents at the registry or deeds, attorney or notary fees and the like. Watch carefully for junk fees!

Tips to Save Home Mortgage Down Payment

If you are faced with monetary constraints when buying a house, you will be forced to avail of a home mortgage plan. A home mortgage plan allows you to pay up for a house for a longer period of time. A house can be paid up for by a buyer on an extended period, paying a certain percentage of the whole amount every paying period with some interest payment.


It’s depend on the agreement of the lender and the borrower, you can choose the amount of down payment that you would like to pay for the initial period. You can choose different amounts for the down payment.


What are some things to consider when choosing an amount to pay for the down payment of a home mortgage plan? Always remember that mortgage payments are always affected by interest rates. Interest rates can add up if it takes you longer to pay up for the principal payment.


The longer takes you to pay, the more you pay. Also, remember that if you can minimize the principal payment amount as you make a larger down payment, then it will always be better. It all depends on the amount of money that you have in his pocket today and how much you expect to make tomorrow.


How do you save for the down payment for a home mortgage? A house is one of the most important and probably one of the most expensive investments that you will get in your whole life, and paying the down payment can really dig a hole in your pockets. Saving is one of the most important things to consider when buying up a house.


There’s one rule that many people don’t realize about how they should save. For most people, savings is the leftover money after all the daily (and miscellaneous) expenses have been covered. The truth about savings is that it should be the first “expense” that should be made.


Calculate the amount of money that you already have in your bank account that you are willing to allot to the down payment and divide the remaining balance of the down payment amount by the number of months that is left for you to pay the down payment. Save the said amount each pay day by prioritizing it as a first expense.


Following the step above is the only sure way to save for a home mortgage down payment. Make sure that you follow it before you seriously consider buying a house.

All about second mortgage

What is second mortgage?

It is a loan taken against your home on which there exists a primary mortgage. The home equity is used as collateral for the second loan.

The second mortgage has less priority compared to the first on the same property. So, if you default, you need to clear your first loan prior to paying off the outstanding balance on the second loan.


When do you choose a second mortgage?

There are situations when you may cash out on your home equity by taking out a second mortgage.
You may have accumulated a large amount of debt through auto loans, balances on high interest credit cards and other bills (medical costs, kid's tuition fees etc) and need to pay them off.

There may be an opportunity for you to invest cash in a business. You can then use a second loan to go for it. But check out if the rate of return on your investment is higher than the second mortgage rate. Only then it will turn out to be a profitable venture.

You may plan to avoid paying private mortgage insurance. But this is possible only when you get a second loan that makes up for 20% of the home purchase price.

You may wish to repay debts and eliminate judgments, pay for your car, purchase a vacation property or plan for a vacation. You can obtain the required cash by taking out a second loan.

How much can you borrow?

A second home loan allows you to borrow on the basis of your home equity. The equity is the difference between the current appraised value of your home and the amount you have paid towards the first mortgage.

With most lenders, you can take a second loan such that the total loan-to-value ratio of your first and second loan is equal to 85% of the home's appraised value. However, there are lenders in almost all states excepting Texas and West Virginia who allow you to take out second mortgages equal to 125% of the appraised value.


What are the possible rates, terms and options?

The interest rates on a second loan are higher to that of the first loan. This is primarily because if you default, you will be paying off the first loan prior to that of the second and as such there is a risk involved in offering second mortgages.

However, you may choose either a fixed rate home equity loan or an adjustable rate home equity line of credit as your second home loan option. The lender will quote you a rate depending upon your credit score, total loan to value ratio and the current market trends. The loan term will vary from 15 to 30 years depending upon the option you choose. But in general, a second loan is offered over a shorter time period compared to a first loan.

How do you get a second mortgage loan?

Getting a second mortgage is similar to taking out a first mortgage on your home. You need to shop for a suitable loan offer by approaching different lenders and getting quotes from them. You can simply fill out a no-obligation free short form to get quotes from the community ranked lenders. Then you should compare the quotes, find out the offer that can cost you less in comparison and provide all necessary paperwork while you apply for the loan. The lender will conduct an appraisal on your home in order to determine its current value and complete all the steps that are necessary to complete the loan processing so that he can arrange for the closing. At closing, you will be signing the note and other documents as required by your lender. You will have to pay closing costs similar to that of your primary loan.

What happens to the second mortgage if you refinance the first?

When you refinance the first loan after getting the second mortgage loan, you should request your lender for a subordination of the second loan. This implies that your second home loan will be considered as a junior lien compared to that of the refinance loan. Otherwise, if you do not subordinate it, the second mortgage will be taken as the first lien and the refinance loan will take over the second lien position. In this case, there will be less risk with the second loan but higher risk involved with the refinance as a result of which the first mortgage refinance will cost you more in interest charges.

With a second home loan, you get the chance to tap a large sum of money. Moreover, you can deduct the interest on your taxes up to a certain limit. But you cannot overlook the costs and the high interest rate associated with a second loan. Besides, if you default on the second loan, you may lose your home. Therefore, prior to going for a second mortgage, it is best to prepare a budget and find out how much you can afford to pay in addition to the first loan.

Buying a New Home for the First Time

is a very different process than purchasing a previously owned home. When you are the first owner of the home, there are many considerations you have to make that used homebuyers don't have to make. For instance, you will need to decide what flooring you want, what color the walls should be, and even what color the outlet and light switch covers should be. These choices can seem overwhelming, so here are a few tips to help you tackle the process.

Start with Getting Financing Before you even begin looking for a home plan, lot, or house, make sure you have your financing in place. While you do not necessarily have to have your loan in hand, pre-approval will help you know how much you can afford. Take a careful look at your budget to determine how much you can afford to pay each month for you home. Be sure to factor your homeowner's insurance and tax bill into that monthly payment amount.

Consider the Location When it comes to real estate, location is key. You want to buy a new house in a desirable location, as this will make the resale value increase over time. Avoid living in dangerous or run down areas. Usually this is not a problem when you are shopping for a new construction, but do consider location as you shop. Also, consider the intangibles about the home's location. For instance, a home that backs up to a busy road or interstate will be harder to sell because the noise from the street detracts from the home's appeal.

Choose the Builder and Developer First Since you are shopping for a newly built home, avoid the temptation to shop based on the home itself. You will not have to worry about ugly wall coverings or carpets. Instead, choose a builder or developer first. Find out which builders have a reputation for well-made homes that they stand behind. Avoid those developers that have a reputation for throwing up a home quickly and shoddily.

How can you find out about a builder's reputation? Talk to people you know who are in the real estate or construction fields. They will be able to tell you which builders to trust, and which to avoid.

Once you have chosen a developer, you can shop for your home among that developer's subdivisions and floor plans. You will be reassured that your home will be built well, and you will also have the assurance that the value will increase over time, because the developer's reputation will stay with the home as long as you own it.

Don't Forget the Inspection Most used homebuyers would not buy without having the home inspected. This is important in a new construction too. You want to have an experienced inspector look at the overall construction of the home. This can be done even before the home is completely finished, as this gives the inspector the chance to see the quality of the building methods and materials.

Avoid Too Many Add Ons As you prepare to purchase your home, you will have a lot of decisions to make. The beauty of buying a new home is that you can choose the carpet color, paint color, and even the color of your cabinetry. However, you will be offered a variety of upgrades to your home. For instance, you may be offered an upgrade to a more expensive countertop or a Jacuzzi tub in the bathroom. This is where the builder stands to make a lot of money off of your sale.

As you make the decisions about the home, make sure the essentials are covered. However, avoid things that are going to be costly upgrades. This can increase the cost of your new home substantially, and you can always make changes later after you have finished the purchase. If you do want an upgrade, do not be afraid to negotiate, and do your research to make sure the price is fair. In the end you will have a new home with fresh paint and brand new flooring no matter what you choose, so make sure you are not paying too much for extras you can add later.

Home Equity Loan OR A Second Mortgage Refinancing

If you are looking into refinancing your second home mortgage refinancing or a home equity loan or line of credit, in some cases you may be out of luck.

If you want to refinance your primary loan, you, firstly, must convince the lenders holding any second position loans to agree to continue to be in a subordinate position behind the new primary loan. This is called Subordination.

When the housing market was in an upswing, getting lenders holding second position loans to agree to subordination wasn't much of a problem. In many cases it wasn't even necessary to ask second position loans to be carried over because the home may have increased so much in value that the second mortgage or home equity loan could be paid off in the refinance. Even if a homeowner requested that a second position loan be carried over in subordination to a new primary loan, the home's increasing value made the lender much more likely to agree to a position of subordination.

With the current housing market, this is no longer the case. Secondary position lenders are now much less likely to agree to remain subordinate. Some will only agree to subordination if you first pay down the principal on the second position loan, which puts them in a better risk position.

In other things, you may have no choice but to refinance your secondary loan. This is an option worth looking into, especially if it means a lower interest rate or a savings on your monthly secondary loan payment. The process of refinancing a secondary loan is essentially the same as refinancing your primary mortgage. If you choose this option, you'll need to shop around. Just be sure to talk to your mortgage professional and the new mortgage company about your desire to refinance your primary mortgage. If the new mortgage company for your secondary loan is no more agreeable to remaining subordinate in a primary mortgage refinance, you'll be back in the same position you started off at, if not worse.

If you are planning on refinancing your primary loan and have a second position loan such as a second mortgage, home equity loan or home equity line of credit, always be sure to contact the lenders for your second position loans first. They will take a look at your loan, the market in your area and your financial situation. They will then let you know if there are any changes that they will require in order to agree to subordination behind a new primary mortgage.

If you don't contact your second position lenders before attempting to refinance your primary mortgage, you may end up in an uncomfortable position once the secondary lender is informed of your pending refinance. Knowing in advance what your secondary lenders would require before agreeing to subordination rather than finding out when the refinance is in process will put you in a much better position. Having to stop a refinance in the middle of the process will end up being a waste of time, as well as a waste of money. You will still be responsible for paying for the refinance work that has already been done as well as any related fees that have been necessary up to the point where the refinance was stopped.

Be sure you know all of your responsibilities and options before you proceed with a refinance, especially if you have secondary position loans.

Types of Home Mortgage Loan

Choosing the home mortgage that is right for you is essential when one is involved in the process of home purchasing. Thus it is important that all options are understood.

Basically, the two things one should consider when considering a home mortgage loan is what type meets best your home purchasing needs as well as which loan offers the most ideal schedule for repayment.

Commonly the types are :

# The fixed mortgage rate loan types

# The adjustable home mortgage rates

# Jumbo home mortgage loans

# B/C home mortgage loans

# Government home mortgage loan programs

# RHS home mortgage loan programs


The fixed mortgage rate loan types

Fixed rate home mortgage loans have an interest rate that basically remain the same for the whole life of the loan.

These payments have predictable monthly fees yet you are immune to any rising interest rates. Therefore, your interest and principal payments will not increase.


The adjustable home mortgage rates

Mortgages that are adjustable in rate have rates of interest that adjust in a periodic manner as based on the exiting conditions of the market.


The rate is initially fixed during the period of its introduction (anywhere between one year to a decade) and is usually lower compared to a mortgage that has its rate fixed.


After this period, the rate then adjusts every year or about semi-annually as based on the index of the market, however it cannot go beyond the pre-determined cap adjustment.


Jumbo home mortgage loans

The amount given out on this type of loan exceeds the amount established by corporations. Since jumbo home mortgage loans are sold and bought on a scale that is smaller, they have rates that are a little high compared to other type of home loans.


B/C home mortgage loans


These types of loans are given to those borrowers that have filed recently for foreclosure or bankruptcy or those who have late payments on their reports of credit.


The purpose of B/C home mortgage loans is the offer of temporarily financing to applicants until they could qualify for type a conforming financing.


Government home mortgage loan programs

One type of government loan programs is VA loans. These types of loans are definitely guaranteed by the US Department of Veterans Affairs.


This allows service persons or veterans to acquire home mortgage loans with terms that are favorable (usually in the absence of a down payment).


RHS home mortgage loan programs


RHS means Rural Housing Service if the USDA or the US Department of Agriculture. This type of loan guarantees residents in the rural area with very minimum costs for closing. Down payments are also unnecessary.


All in all, there are a lot of home mortgage loan programs available. It all depends on your needs, wants and means.