1st And 2nd Mortgages Loans Or 80-20 Mortgages - Are They A Good Idea?

When a borrower applies for a mortgage loan, he iscircumvent the payment of PMI, as there would be
generally required to make a down payment as parttwo loans. One covers eighty percent through the first
of the mortgage terms and conditions. Traditionalmortgage and the other, the remaining twenty percent
lending agencies like banks and credit unions financethrough the second mortgage, finances the total loan
only eighty percent of the price of the home. Thisrequired.
makes it obligatory for the prospective mortgagee toThe eighty twenty loans are especially beneficial to
provide the balance twenty percent. Even when thisfirst time home purchasers. First home buyers are
appears to be a fair condition, the fact is that notgenerally young people who have been unable to build
many people are in a position to provide the type ofcash reserves large enough to cover the down
money required, covering the down payment. This haspayment. However, they still want to go ahead with
led to piggyback or 80/20 mortgage loans beingthe purchase of a house. By opting for the 80/20
offered by mortgage lenders.loans, they do not have to put off their plans for buying
The basic idea behind the 80/20 loans is quite simple. Ifa home.
the buyer does not have the required down paymentThis loan is also helpful to people who suffer poor
of twenty percent, he would naturally look for a 100%credit ratings. They do not stand a chance with banks,
finance, which would lead to his paying PMI or Privatemortgage companies or credit unions because these
Mortgage Insurance without which the loan would notagencies prefer to deal with applicants who have a
go through. PMI adds nearly $100 to each of thehigh credit rating. These loans provide assistance by
monthly mortgage payments.way of low mortgage rates, closing costs and down
On the other hand, financing the entire cost of thepayment among other facilities.
property to be purchased through an 80/20 loan would