| Are you considering buying a new home, but do | | | | something called an 80-20 loan. An 80-20 home |
| not have the funds for the required down | | | | loan takes the cost of the home and divides it |
| payment? Or maybe you save the money for | | | | into two mortgages. The first mortgage is for |
| the down-payment, but are not sure if you want | | | | 80% of the home's value. Depending on the |
| to use it for another type of purchase? If either | | | | specific needs and wants of the borrower, the |
| situation fits you, then 100% home equity loans, | | | | first mortgage can be a fixed rate, adjustable |
| also called a zero down home financing, might be | | | | rate, or interest only loan. The second mortgage |
| the solution for you. | | | | is for 20% of the cost of the home. This second |
| The first step to understanding 100% financing is | | | | mortgage, also called a "piggyback loan," is usually |
| to be aware of something called Private Mortgage | | | | a fixed mortgage or a home equity line of credit. |
| Insurance (PMI). According to All-Options, "PMI | | | | With the two mortgages, you are financing 100% |
| insures the lender against loss if the borrower | | | | of the cost of your home AND avoiding the |
| defaults on the mortgage loan. PMI is usually | | | | additional monthly cost of PMI. |
| required when the borrower's down payment or | | | | Zero down home loans can be a great option for |
| equity is less than 20% of the loan value." | | | | those who don't have the ability, or the desire, to |
| Although not every mortgage lender insists on | | | | put down a large down payment. With an 80-20 |
| mortgage insurance, those who adhere to the | | | | mortgage, you are able to avoid PMI and the |
| Fannie Mae and Freddie Mac loan approval | | | | required 5% down payment that many |
| guidelines will require it. | | | | conventional mortgage products require. Before |
| PMI is added into the cost of your mortgage, so | | | | you begin shopping for an 80-20 loan, it is |
| your monthly payments are higher than if you | | | | important to know and understand your credit |
| had put 20% down on the loan. Therefore, many | | | | score, as many lenders require a strong credit |
| people who are looking for a no money down | | | | history for this particular mortgage option. |
| home loan and want to avoid PMI, turn to | | | | |