Mortgage and Loan Tips

Actually, an 80-10-10 mortage is a little bit of a misnomer, because it's not really a mortgage, but rather two mortgages put together in a way that allows a buyer to avoid paying the monthly cost of Private Mortgage Insurance (PMI).

Most banks and lenders insist that a home buyer pay for private mortgage insurance if they do not have a down payment of at least  20% of the home's appraised value.  Of course,  If you can afford 20% down, you will not need PMI.  If you don't, however, have 20% to put down, the 80-10-10 is an approach that still allows you to avoid the PMI payment.

So, what is an 80-10-10 mortgage? ...

An 80-10-10 mortgage breaks up the mortgage loan into two separate loans. 80% of the loan is financed as a first mortgage, typically at current competative rates. 10% of the loan is then in a second mortgage, usually at a slightly higher rate. The final 10% comes from a cash down payment.Read the rest...

Private mortgage insurance is usually required by your lender if your mortgage amount totals more than 80 percent of the fair market value (FMV) of your home.

The simplest solution is to pay 20% down, right? Well, it is a simple answer, but often an unreasonable one for the average homebuyer. However, there other options available to you. One common option is an "80-10-10" loan, available from some lenders. Lenders are open to this because they don't profit much from the PMI payment, they only use the dollars to protect themselves from the risk of you defaulting.

Therefore, many lenders have no issues presenting alternatives that allow for the elimination of PMI. If you have the money for a ten percent down payment, 80% of your home's value can be placed in the first mortgage, allowing you to skip the PMI payment. The remaining ten percent comes from a second mortgage, usually financed from another lender. This second mortgage will be at a slightly higher interest rate, but if the terms are reasonable, you will save money.

This is the option I've used myself, for a home that was purchased in December of 2007.  So, don't let anyone tell you they don't exist...just find the right mortgage broker.   See our related article, "what is an 80-10-10 mortgage loan?"

A less common solution, but one that might save even more...Read the rest...

If you are getting ready to close on a loan for a house, keep a look out for those charges in the closing statement that are negotiable. Not all of them are, but insiders know the items that are up for haggling. Aubrey Clark points out how to save money by finding the most obvious places to negotiate. When you are working with your lender, they all use a standard form called a "good faith estimate". This form has numbered sections that correspond the various fees paid by buyers and sellers. The place to look at is the section numbered 800...Read the rest...