80/10/10 Loan (Piggyback Mortgage) Is Back

If you have only 10% downpayment and still wish to eliminate private mortgage insurance (PMI), we have the right solution for you – 80/10/10 loan (also called Piggyback loans). Yes, it’s back and this post will give you all the details you need to know.

How does a 80/10/10 loan work?

Usually a 2nd mortgage or a Home Equity Line of Credit  (HELOC) is offered up to 90% of the home value. Such kind of loans are popularly known as 80/10/10 loans, where the first mortgage is 80 percent of the home value, second mortgage or HELOC is 10 percent and the rest 10 percent is the down payment by the borrower.

Show Me The Numbers:

Example #1 – Using 80/10/10 loan to avoid PMI

Say you are buying a house worth $650,000 and you only have 10% downpayment i.e. $65,000. You need a loan amount of $585,000. You can get one loan of 90% and pay mortgage insurance on it. Or you can get two loans – 1st mortgage for 80% i.e. $520,000 and a 2nd mortgage (HELOC) for 10% i.e. $65,000. You dont pay mortgage insurance on either the 1st or the 2nd mortgage.

Example #2 – Using 80/10/10 loan to qualify for a higher loan amount

Say you wanted to buy a $850,000 house and had only 10% downpayment. You wont qualify for any loan since Jumbo loans (loan amounts higher than conforming limits) require a minimum of 20% downpayment. So if your property is in a high cost area and conforming limit is $625,500 – with a 10% down your maximum loan amount can’t exceed $625,500. But with a 80/10/10 loan you can buy a $850,000 house by putting down only 10%.

Example #3 – Using 80/10/10 loan to avoid paying jumbo mortgage rates

Say you are buying a $900,000 house and have 20% downpayment. You can get one loan of $720,000. But you dont want to exceed the conforming limit and dont want to pay the higher interest rate of a Jumbo loan. In this example, you can get a $625,500 loan on the 1st (assuming that is the loan limit in your county) and can get a HELOC for $94,500. You are still paying 20% down, so technically its not a 80/10/10 loan. But using a HELOC on the 2nd and splitting the loan into two, you can avoid paying higher interest rate for a Jumbo loan.

How can I qualify for a 80/10/10 loan?

We offer this loan program for both home purchase and refinance. Property must be owner occupied. A minimum credit score of 720 is required for California (CA) borrowers and 700 for Washington (WA) and Oregon (OR) borrowers. Some of the additional guidelines for the HELOC is mentioned below:

  • Maximum loan amount of $350,000 (This is the maximum ONLY for the HELOC and NOT the 1st mortgage + 2nd mortgage loan amount)
  • No foreclosure or bankruptcy in the past 10 years
  • $50.00 annual maintenance fees
  • Early termination fee of $475 if the line is closed within 3 years
  • First 10 years draw period, next 20 years repayment period

______________________________________________________________________________________________________

Shashank Shekhar

Mortgage Broker/Banker | San Jose, CA

(408) 615-0655 | Shashank@ArcusLending.com

Ranked among Top 150 Loan Officers and Top 40 under 40 Most Influential Mortgage Professionals in the Country

Check out our 5 Star Review on Google Places and Yelp

Connect on Facebook Follow me on Twitter Watch me on YouTube 

Comment balloon 1 commentShashank Shekhar • December 27 2012 10:36PM
80/10/10 Loan (Piggyback Mortgage) Is Back
share
If you have only 10% downpayment and still wish to eliminate private mortgage insurance (PMI) we have the right solution for you – 80/10/10 loan (also called Piggyback loans). Yes, it’s back and this post will give you all the details you need to… more
How To Qualify For California Home Affordable Refinance Program (HARP…
share
Fannie Mae and Freddie Mac recently released the guidelines for the new expanded California Home Affordable Refinance Program (HARP) also called Obama Government Refinance program Here's 7 things you need to know: The program starts… more
FHA Extends 90-day Flip Rule for California Homes till December 31,…
share
In an effort to continue stabilizing home values, Acting Federal Housing Administration (FHA) Commissioner Carol J. Galante has today extended FHA’s temporary waiver of the anti-flipping regulations through December 31, 2012 for California and rest… more
Home for Sale in Brittan Heights, San Carlos, CA
share
Located in highly regarded Brittan Heights, this attractive San Carlos, CA home for sale boasts four bedrooms, two and a half bath with views of the Bay and the San Carlos Hills. Set on a large front yard, there’s room to create an outdoor living… more
California Conforming and FHA Jumbo Loan Limits Going Down for 2011…
share
California Conforming and FHA Mortgage Jumbo Loan Limits for 2011-2012 are Going Down in less than 4 weeks. Watch the Video below that talks about the FHA and Conforming Jumbo Loan Amounts going down to $625, 000 and how will that impact… more
Estate for sale in Los Altos Hills, CA - Over $200, 000 in Price…
share
Estate for Sale in Los Altos Hills, CA - Over $200, 000 in Price Reduction. This Los Altos Hills estate is located at 12001 Finn Lane, Los Altos Hills, CA 94022. Some of the features of this Los Altos Hills Estate include: .. more
4 BR, 3 BA, Single Family Home for Sale in Willow Glen Area of San…
share
4 BR, 3 BA, Single Family Home for Sale in Willow Glen Area of San Jose, CA. Priced at under a million dollars. The House is located at 1420, Mercer Ave, San Jose (Willow Glen Area) - Zip 95125. Some of the features include: … more
Single Family Home For Sale in Evergreen, San Jose, CA with top…
share
4 Bedroom, 2. 5 Bathroom Single Family Home located at 3451 Pepperidge Drive is now for sale in the Evergreen area of San Jose, CA The property boasts of top Evergreen Schools - Cedar Grove Elementary, Quimby Oak Intermediate and Evergreen Valley… more
San Jose, CA Real Estate Market Trend Moves Up in March-2011
share
Market Report-San Jose Single Family Real Estate Trend: When compared to the previous month, the median price, average price and the number of sales increased in March 2011. The average days (the days taken for listing to actual… more
San Jose, CA First Time Home Buyers - Free Web Class for YOU!
share
As part of our Home Ownership Workshop of free Web Classes, Shashank Shekhar Mortgage Broker/Banker with Arcus Lending and author of the book "First Time Home Buying 101" will talk about "Financing Options for First Time Home Buyers… more