No Down Payment Poor Credit Mortgage Loans Understanding 80 20 Loan Option
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No Down Payment and Poor Credit? Understanding the 80/20 Mortgage Loan Option
Overview
Applying for a mortgage often involves a down payment, with traditional loans typically covering only 80% of the home's price. This leaves buyers needing to contribute the remaining 20%. While a 20% down payment is ideal, it's often unattainable for many. To address this, lenders offer 80/20 or piggyback mortgages, which allow homebuyers to finance their homes without a large upfront payment.
What Are 80/20 Home Loans?
The 80/20 home loan concept is straightforward. Normally, without a 20% down payment, buyers must purchase private mortgage insurance (PMI), which can raise mortgage costs by about $100 monthly. However, with an 80/20 loan, no PMI is needed. Instead, the homebuyer receives two loans: the first covers 80% of the home price, and the second covers the remaining 20%.
Who Can Benefit from an 80/20 Home Loan?
Those aiming to avoid PMI will find the 80/20 option appealing. It's particularly beneficial for first-time buyers or young couples who may not have significant savings. This option allows them to purchase a home without delay.
These loans are also accessible to individuals with poor credit. While traditional lenders like banks and credit unions often require high credit scores, many lenders provide bad credit mortgage options, including assistance with down payments and favorable terms.
Applying for an 80/20 Loan with Poor Credit
Mortgage brokers are invaluable for guiding applicants with poor credit toward suitable loans. Many brokers offer online resources to explain various bad credit home loan options. You can easily request a mortgage quote online and receive multiple offers from lenders willing to provide piggyback loans to those with less-than-perfect credit.
By leveraging the 80/20 loan strategy, you can bypass traditional hurdles and secure a home without a substantial down payment, even with poor credit.
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