80/20 Loans

[Remaxman]

80/20 IMO is the way to go, around my area the second is more like a home equity line, so when you pay it off / down you will still have it available for emergiancy, remodel etc....

I would NOT do an arm, reason being if you do with the intent to re fi in 3 years or whatever you will have closing cost all over again and will have to re qualify again for the loan, you never know how you will be finacially in 3 years, bad things can happen and you may not qualify...

If you need closing cost, ask the seller to pay, we use the phrase "Seller to pay UP TO $XXXX of buyers closing costs to INCLUDE pre paids, escrows, discount and or origination points if any."

[AZLender]

Why would he want to take full draw on an equity line at closing? Federal Chairman Ben Bernanke has already announced he is going to raise rates 3 more times by June 2006, this will put prime at 8.250%. You can get a closed end second 30/15, 100% CLTV at 7.375%. This is not affected by rate hikes as fixed rates tend to follow the yield on the ten year treasury note.

Another point, why would you even consider going with anything other than an ARM on the first? You want the lowest rate possible and this will enable a number of things:

1) Lower monthly payments, building more equity.
2) Lower rate on the second, without having to worry about the rate rising.
3) By taking the ARM, this will enable you to get a much better feel for the home without the higher payment of the 30 year fixed.
4) Should you decide you want to stay in the residence at that point, THEN refinance to a 30 year fixed consolidating both your first and second at or below 80% LTV.

The way a 30 year fixed is amortized, you are paying primarily interest only the first 5 years anyway at a much higher rate. You will gain more equity, with a lower monthly payment by taking this option.

I think what Remax is referring to are what are called seller concessions. This would be worked out between your realtor and the sellers agent and is usually structured at 3 or 6%.

[Real Estate Talk]

Well an 80/20 is 100% financing. Hence there will be 2 loans one of which which is 80% and one which would be 20%. The 20% would be at a higher interest rate.

I'd stay away from these because you would have no equity and if the value went down then you'd be upside down on your loan. And as far as the market is right now its on its way down so more then likely you will be upside down on your loan.

I suggest you just pay the 20% down that way you'd have some equity in the house.

[Tim7332]

Hi all. I have read with interest the posts and answers by the experts at this forum.

I have a good FICO of 745, but will only have money for closing costs when I am ready to buy within the next 6 months. I was told an 80/20 is the best option for me.

Just curious what your thoughts are.

With that fico score I would avoid an 80/20 program.

Here in California we have this program called CalHFA which is a 97% first mixed with a "silent second(no payments)" that can give you 103% financing. The great thing is it has below market interest rates. You do have to be a first time homebuyer though and can't make more than a certain income level.

I'd also recommend just getting a fannie mae 100% loan which you should qualify for with that fico if you are not a first time homebuyer. They even have a lender paid mortgage insurance option if you're concerned with that. Furthermore in this type of a market you can get the seller to pay your closing costs most likely.

Bottom line is there are better options for you with your fico score than an 80/20 which will more than likely have an adjustable first. Lower payments are great but having to refinance every couple of years just eats away at any equity you make.

Both of the programs I mentioned would be fixed for 30 years.

[Mike Colpitts]

Madeline that's not a bad way to go. I've bought several places that way over the years myself 80/20 and had lots and lots of clients do the same. The interest only second can also sometimes be redone to reduce the interest rate over time if you like without a complete refinance.

Good luck finding the right home!

[shayne54]

I would also check into lender paid MI on a straight 100% loan. I give my clients several options and it seems lately the Lender Paid MI is cheaper overall payment wise than even the 80/20. Also, the closing costs on 1 loan are going to be lower than doing an 80/20. Go with a 30 year fixed. With the way the yield curve is right now it isn't worth the risk of going with an arm.