When it comes to purchasing luxurious and high-value properties, who do you turn to for help? It’s Jumbo loans!
Jumbo mortgages can help home buyers such as yourself who need a loan amount that is much higher Jumbo loan limit Texas than the maximum limit for traditional loans. It has always been a useful tool for buyers with high income who want to avoid the expenses on Private Mortgage Insurance (PMI).
However, it can be hard to qualify for a jumbo loan especially with all of its stricter requirements. Some require a large down payment that’s a bit higher than most conforming loans. It is around ten to twenty percent depending on the size of the loan and the FICO scores. Also, its interest rates might be a bit higher than what most borrowers can afford.
With this in mind, another tool that homebuyers use to buy their dream houses is the piggyback loan. Just like jumbo loans, you can use this to borrow large amounts of money and avoid PMI.
It is also referred to as an 80-10-10 loan and most recommended to people who can qualify for a significant amount of loan when it comes to credit and income but don’t have the amount for a down payment that jumbo loans ask for.
Piggyback loan, in a nutshell, is composed of two different loans taken by one borrower for the same house, all at the same time. Its name came from being a combination of two mortgages. Occasionally, the first mortgage is at 80% of the value of the home, the second is at 10 or 15% and the remaining percentage is paid as down payment. This is where the 80-10-10 is taken from.
Sometimes, the lender might allow an 80-5-15 loan. This type can stay within the limits of conforming loans. In some cases, the first and the second digits indicate the first and second loan amounts while the third shows the amount of down payment.
No matter its structure, it helps buyers who want to buy high-value properties without the need for a jumbo loan and avoid PMI. It’s the best of both worlds.
A PMI is not tax deductible especially for people who are already making more than $100,000 annually. Aside from that, it is very costly as an expense, so a lot of borrowers simply put down more money to avoid
Piggyback Loans Vs. Jumbo Loans
When considering piggyback loans, you have to keep in mind the involved specifics when a credit home equity line or an adjustable mortgage is included. If you apply for a piggyback mortgage or a jumbo loan, you have to discuss it with a qualified mortgage expert or lender so choose a person who you can trust since getting a loan is like getting into a 30 or more-year commitment.
Before you choose your loan, you have to weigh in the pros and cons first and then decide based on your financial status and need.