80/10/10 Loan Program Announced by California Mortgage Lender

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Arcus Lending recently announced the launch of 80/10/10 loan program, which will eliminate the need for private mortgage insurance for borrowers who want to put only 10 percent down payment.

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Many home owners lost a lot of equity in recent years thus making it difficult to refinance with 20 percent equity. Also a majority of first time home buyers do not have a 20 percent down payment . This loan program will solve the needs of such borrowers.

California mortgage lender, Arcus Lending, recently announced the launch of 80/10/10 loan program, which will eliminate the need for private mortgage insurance (PMI) for borrowers who want to put only 10 percent down payment.

PMI is required on all conventional loans with less than 20 percent down payment. So if borrowers had 10 percent down payment and opted for one loan of 90 percent, they would end up paying PMI.

"Many home owners lost a lot of equity in recent years thus making it difficult to refinance with 20 percent equity. Also a majority of first time home buyers do not have a 20 percent down payment. This loan program will solve the needs of such borrowers," said Shashank Shekhar, CEO of Arcus Lending.

If a borrower is buying a house worth $650,000 and has only 10 percent down payment i.e. $65,000, he will need a loan amount of $585,000. He can get one loan of 90 percent and pay mortgage insurance on it. Or get two loans – 1st mortgage for 80 percent i.e. $520,000 and a 2nd mortgage Home Equity Line of Credit (HELOC) for 10 percent i.e. $65,000. The borrower doesn't pay mortgage insurance on either the 1st or the 2nd mortgage.

The HELOC will be offered up to 89.9 percent of the home value and will be available for both home refinance and purchase loans. Property must be owner occupied. A minimum credit score of 720 is required for California (CA) borrowers and 700 for Washington (WA) and Oregon (OR) borrowers. More information about 80/10/10 loan program can be found at http://goo.gl/jJHA9

This loan program can be also be used to qualify for a higher loan amount. If a borrower wanted to buy a $850,000 house and had only 10 percent down payment, he won’t qualify for any loan since jumbo loans (loan amounts higher than conforming limits) require a minimum of 20 percent down payment. So if the property is in a high cost area and conforming limit is $625,500 – with a 10 percent down the maximum loan amount can’t exceed $625,500. But with a 80/10/10 loan the borrower can buy a $850,000 house by putting down only 10 percent.

While these loan programs were very common during the early part of the century, the mortgage meltdown resulted in lenders withdrawing from offering HELOCs with less than 20 percent equity in the house. The return of HELOCs with only 10 percent equity is definitely an encouraging sign and would be welcomed by the borrowers who can't afford or don't want to put 20 percent down payment. Till recently when this option was not available, such borrowers had no option but to pay for private mortgage insurance or get a loan insured by Federal Housing Administration (FHA). FHA loans too carry a hefty mortgage insurance.

About Arcus Lending:
Arcus Lending is a Mortgage Broker and a Direct Lender in California with offices in San Jose and Fremont. They offer a variety of loan programs for residential mortgages, quick closing and legendary customer service. They can be reached via email at Info(at)ArcusLending(dot)com and via phone at (408) 615-0655 or via their website http://www.arcuslending.com/

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