80 / 20 Mortgage Loans: What You Need to Know About No Money Down Mortgages

Most traditional mortgage lenders require a twenty percent down payment to qualify for a loan. For many potential homeowners, this down payment is a barrier to homeownership. If you are a homeowner in this situation there are now loan programs available that can help you achieve your goal of homeownership. These loans are 80/20 mortgages; often referred to as piggy back loans.

How Does an 80/20 Mortgage Work?

80/20 loans are a relatively simple concept. These loans are typically handled by two lenders. Your primary mortgage will cover 80 percent of the purchase price and you will have a second “piggy-back” loan for the remaining 20 percent. The advantage of this type of mortgage is that you will not have to take out Private Mortgage Insurance to qualify. Private Mortgage Insurance can add hundreds of dollars to your monthly payment amount and does absolutely nothing to protect the homeowner.

How Do I Qualify for an 80/20 Mortgage Loan?

If you are considering purchasing your first home or currently carry Private Mortgage Insurance on your existing mortgage, you could benefit from an 80/20 loan. First time homebuyers benefit from 80/20 financing but rarely understand how to obtain this type of loan. Mortgage brokers can be an excellent resource for finding lenders that offer piggyback loans. The Internet is also an excellent tool for comparing loan offers from a variety of lenders that offer piggyback loans.

When you compare loan offers it is important to compare all aspects of the loans, not just the interest rates. Keep in mind that the interest rate you will qualify for on the piggyback loan will be higher than your primary mortgage because this lender assumes more risk. If you have credit problems an 80/20 loan can get you into a home and on track to rebuilding your credit. You can learn more about your 80/20 mortgage options, including common mistakes to avoid by registering for our free mortgage guidebook.