If you are considering 100 percent financing to purchase your home because you lack the necessary down payment, 8020 mortgages could help you secure the loan you need. Here are the basics you need to know about 8020 mortgages to help you decide if this type of loan is right for you.
Housing prices are at near record highs across the country in recent years. This can make it difficult to qualify for a mortgage when you don’t have the necessary 20% down payment. 8020 mortgages allow you to purchase your home without paying extra for expensive Private Mortgage Insurance which can add hundreds of dollars to your payment.
What are 8020 Mortgage Loans?
8020 loans are actually made up of two mortgage loans. You will have a traditional mortgage for the first 80 percent of your home’s value and a second loan for the reaming 20 percent. This second mortgage loan can be from a different mortgage lender and will have a slightly higher interest rate than your first mortgage. 8020 mortgage loans typically offer 100 percent financing by combining the two loans; however, you may find loan programs offering 103 percent financing to include closing costs.
How to Find an 8020 Mortgage Loan
The best place to start your search for an 8020 mortgage is with a local mortgage broker. You will need to find someone willing to work for a reasonable origination fee without charging you Yield Spread Premium. Reasonable origination fees should not be more than one percent of your loan amount. If you’re not already familiar with Yield Spread Premium this is simply the markup your mortgage broker adds to your interest rate to get a commission from the lender. Because you’re already paying an origination fee for the broker’s services, this commission is completely unnecessary.
If you’ve decided to work with a mortgage broker for your 8020 mortgage you can avoid paying Yield Spread Premium by being upfront with your intentions for the loan. Tell potential mortgage brokers that you understand how Yield Spread Premium works and will not accept any mortgage that includes this markup. You can learn more about your 8020 mortgage loan options, including expensive mistakes to avoid with a free mortgage refinancing toolkit.