Dennis asked:
I am a first time Home buyer, and my Loan Officer is confusing me about an 80/20 and an FHA Loan. To anybody familiar with these terms, can somebody explain it to me what these two types of Loans are? And which would be advantagous on my part. Thank you.
Tim
I am a first time Home buyer, and my Loan Officer is confusing me about an 80/20 and an FHA Loan. To anybody familiar with these terms, can somebody explain it to me what these two types of Loans are? And which would be advantagous on my part. Thank you.
Tim
Melanie
FHA federal housing authority affialiated with hud.
80/20 is 80 % of the loan is pd by one lender and 20% by the other basically meaning you have 2 loans. Known as piggy back loan, just helps you qualify for more of a home.
I think your loan officer can answer this better if you ask for a detailed explaination….depending on the home you get would be which loan I would get.
But FHA would be a better way as long as rates are good. FHA loans your less likely to have to produce a down payment.
I had to add this to knowing which program is right for you will depend on several factors. Consider how much money you have available for down payment. Make sure you sit down with your lender so that you clearly understand your budget before looking for a new home. And when “doing the math” for your own situation, be sure to keep in mind that you’ll likely need to cover expenses like earnest money, mortgage insurance and closing costs for the transaction. On a 80/20. FHA loans your less likely to have to produce a down payment.
Sorry I got to thinking about it and had to refurbish.
Comment by ~Concerned~ — March 23, 2009 @ 3:49 pm
Ron
80/20 basically is an 80% first t.d. and and 20% second t.d. (100% of the purchase price). Reason why most go with an 80/20 program is because you wont have to pay monthly mortgage insurance. Monthly mortgage insurance is required on most loans over 80% (i.e. FHA).
FHA requires a 3% down payment (97% financing) and will have mortgage insurance (insurance that protects the lender in case of you defaulting on your loan) in addition to the requirement of also have your monthly insurance and taxes incorporated into your payment.
FHA loans basically are for borrowers with no so good of a fico, but have an explanation for previous derogatory credit that was a one time occurrence and also has minimal down payment and reserves (most lenders require that borrowers have at least 2 month of mortgage payments (principle, interest, taxes and insurance) as reserve requirement).
If you have a good fico score and dont want to put any money down, I would go for the 80/20 program (if you can prove your monthly income, and it is good enough to qualify under the lenders debt vs income ratio you would get a better interest rate).
Comment by dvd — March 26, 2009 @ 10:58 pm