With the tightening of the credit markets, I wanted to update you on what is available when buying a home or refinancing. At this point, the days of 100% financing are mostly over. Of course, your unique situation will dictate exactly what you will qualify for.
- 95% LTV (Loan-to-Value) loans
Although it may be possible to put together a first and a second loan to cover 100% of the loan, lenders’ guidelines are in a state of flux. So what would work this week may not work next week. Most buyers today will need to come up with at least a 5% down payment.
- Private Mortgage Insurance (PMI)
The federal government has permitted home owners to deduct PMI premiums from their federal income taxes since 2006. That authority was due to expire after just a year but the government last year enacted a three-year extension. That gives a boost to borrowers who would have trouble putting together a piggyback loan package as a way to avoid the cost of PMI.
- Piggyback Loans
Many lenders have left the second loan sector. Those that remain want to see higher credit scores from applicants (generally, greater than 680). An example of a Piggyback loan is the popular "80-20" loan. This is when 80% of the home loan is financed by one lender and 20% of the loan is financed by another lender and the home buyer has zero down payment.
- Fannie Mae, Freddie Mac and the FHA
…are coming to the rescue with increased FHA loan limits and other programs to increase the availability of affordable mortgages.
If you have any questions, feel free to contact me at anytime.