'This loan program will make home ownership a reality for home buyers who do not or cannot make a high mortgage insurance payment,' said Shashank Shekhar, CEO of Arcus Lending.
San Jose, CA (PRWEB) September 07, 2013
Good news for home buyers. A new loan program called the 80/10/10 loan offered by California mortgage lender will help home buyers qualify for a higher loan amount and reduce their monthly mortgage payment.
What is an 80/10/10 loan?
A loan program where the first mortgage is 80 percent of the home value, a second mortgage or Home Equity Line of Credit (HELOC) is 10 percent and the rest 10 percent is the down payment by the borrower is popularly called an 80/10/10 loan.
What are the benefits of an 80/10/10 loan?
Currently, if a borrower is putting less than 20 percent down payment, he needs to pay mortgage insurance (MI) for all conventional loans. This means that if borrowers have 10 percent down payment and opt for one loan of 90 percent, they would pay MI. However, an 80/10/10 loan eliminates the need for a mortgage insurance.
"Funds for down payment are a major obstacle in home ownership for buyers. Borrowers who have less down payment funds have no option but to get a Conventional or an FHA loan wherein they have to pay high mortgage insurance. This loan program will make home ownership a reality for such home buyers who do not or cannot make a high mortgage insurance payment," said Shashank Shekhar, CEO of Arcus Lending and Author of “First Time Home Buying 101.”
How does the program work?
If a borrower is buying a house worth $700,000 and has only 10 percent down payment i.e. $70,000, he will need to borrow $630,000. He can either get one loan of 90 percent and pay mortgage insurance on it or get two loans – 1st mortgage for 80 percent i.e. $560,000 and a 2nd mortgage- Home Equity Line of Credit (HELOC) for 10 percent i.e. $70,000. The borrower doesn't pay mortgage insurance on either the 1st or the 2nd mortgage.
What are the conditions for this HELOC?
- Offered up to 89.9 percent of the home value
- Loan available for both purchase and refinance
- Property must be owner occupied
- Maximum loan amount between 1st and 2nd mortgage can’t exceed $750,000 with a 10% down payment and $975,000 with a 15% down payment.
- A minimum credit score of 700 is required
- The first mortgage needs to be a 30 Year Fixed loan program
More information about 80/10/10 loan program can be found at http://goo.gl/jJHA9.
The 80/10/10 loan program can also be used to take a higher mortgage. To illustrate, if a borrower wants to buy a $750,000 house and can only afford a 10 per cent down payment, he will not get any loan. Jumbo loans, which are loans with amounts greater than conforming loans, require a minimum of 20 per cent down payment. Assuming the property the borrower wishes to buy is in a high cost area; the conforming loan limit being $625,500, if the borrower makes a 10 per cent down payment, the maximum loan amount cannot be more than $625,500. With an 80/10/10 loan, the borrower can buy such a house with only 10 per cent down payment.
About Arcus Lending:
Arcus Lending is a mortgage broker and a direct lender in California. They offer a variety of loan programs, 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/.