I'm looking into the possibility of 100% financing to buy a home. The type of mortgage is often called a piggyback loan, or an 80/20 loan. Does anyone have any experience with this? Would it be better for me to wait until I have a 5% downpayment saved up, which might take me a few years? I really want to own my own home...so sick of renting. I have a 3 year old and he needs to have a better life too.
2006-07-02 10:05:46 · 4 answers · asked by tictickchick 3 in Business & Finance ➔ Personal Finance
So you are tired of paying rent to your landlord? Ready to FINALLY own a home? Congratulations
Many people never own their own home because of fear. Maybe you have fear that you'll have to reveal credit problems to the lender and then get turned down. Maybe it's because you've rented for so long, you feel like there is no way out. Or that the housing market is going to crash.
It's time to put your fear aside. Learn why it is easier and cheaper to obtain home financing than at any time in history! You'll learn how you can get approved and FINALLY stop wasting thousands dollars every year on rent.
Here are the main reasons why you most likely have never attempted to become an owner:
1.) You might think that you need 20% down before a mortgage lender will even talk to you
2.) You might think that a couple of past credit mistakes will bar you from getting approved
Well, as you are about to discover, you're wrong on both counts. Let's examine some secrets that most renters don't know:
Renter-Turned-Owner Secret #1
You don't need a 20% down payment in most cases. - There are many federal, state and local programs that are specifically designed to help low-income families with little or no down payment to get into a home. If you are a first-time home buyer, you may qualify for special loan programs that will assist you in getting approved, even if you don't have the standard 20% down payment.
Renter-Turned-Owner Secret #2
Even people with credit problems can get approved. - Your credit rating isn't the only factor lenders take into consideration when loaning you money. They look at your down payment amount, debt-to-income ratio, and other factors. Especially if you can come up with more than the minimum down payment or provide some form of equity to borrow against, the lender can seriously consider loaning you the money to purchase a home.
Renter-Turned-Owner Secret #3
Some sellers are willing to finance you to purchase their home. - Some sellers may offer to finance you so that you can purchase their home, by using a seller take-back to secure a second mortgage loan.
Renter-Turned-Owner Secret #4
In some cases, the lender will offer to loan you the down payment too! If you have decent credit, and some other asset to borrow against (such as a car), your lender might be able to not only loan you the money to purchase the home, but your down payment also.
As for piggyback loans, given the current Fed Fund Rate at 5.25 it just no longer makes sense. There are plenty of product out that will allow you a single loan without having to pay Mortgage Insurance.
May I be the first to congratulate you on empowering yourself.
Best Regards,
Darren
2006-07-02 12:07:46 · answer #1 · answered by Darren Meade 2 · 3⤊ 1⤋
A major reason people get 80/20 loans is because they don't have anything to put down on a house and the 2nd mortgage keeps them from getting PMI. However, a big problem with the 2nd mortgage is that it is often and adjustable rate that eventually gets out of control.
While no one can tell you NOT to buy a house, going into a home with nothing down is typically not a good idea. Do you have anything in savings? What would happen if something happened to your home? People tend to forget that a home has costs associated with it that renting does not - maintenance, taxes, lawn care, etc. I would not recommend becoming a homeowner unless you're able to put SOMETHING down as a down payment and have some sort of emergency fund in place to cover unexpected expenses. You want a house to be a blessing for you and your child, not a curse.
Get yourself a budget, create a house fund, and make sure you are TRULY ready to buy and not just having a knee-jerk reaction to house-fever.
2006-07-02 14:43:27 · answer #2 · answered by LoveMy2J's 2 · 1⤊ 0⤋
Not a good idea. If you can wait a couple of years and save up a small down payment, you'll be in a much better place.
2006-07-02 10:44:42 · answer #3 · answered by homeschoolmom 5 · 0⤊ 0⤋
DO NOT DO IT Housing prices are falling if you buy now by next year you will owe more than the house is worth
try a government first time home buyers program first
2006-07-02 10:10:22 · answer #4 · answered by Anonymous · 0⤊ 0⤋