First time Home Buyer and confused. What is the Difference between an 80/20 and an FHA Loan?

Posted on Dec 2, 2012 in FHA Information

Question by bambam: Does anyone know of mortgage bankers or direct lenders who do low FICO purchases in Maryland?
I am looking to purchase a home in Baltimore County Md. and I am in the process of cleaning my credit . I have limited funds, sale pills therefore I’m looking put as little down as possible.

Best answer:

Answer by unisberkensap
http://www.naca.com

100% financing
5.25% 30 yr fixed rate
credit scores don’t matter
No closing csts

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Question by unknown11233: How should I get a mortgage loan with low credit score?
Ok here is my situation.
I am trying to get the no income verification loan to buy my first house.
I have 10% of the price of the house to pay for down payment.
About my credit: I have everything paid off in full. All debts are paid off in full. but this was recently so my credit score didn’t go up yet it still at 515.

Now my question: Can I get a no income verification loan with my credit score this low?

Also How long does it take to update my credit score?

Best answer:

Answer by jwilliams22mn
Ok, and wait a few months. Your credit score will go up dramatically. It will be worth the wait. Then, you do NOT use any of your money for a down payment. If you are a first time home buyer there is absolutely no need for that. Wait until you have the ball in your court with a good credit score and excellent savings. We bought our house recently with a credit score of 650, and major past problems.We got a zero down loan at 6.1% 30 year fixed. You can do this too! Good Luck!

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Question by Dom: Is it possible to refinance FHA to conventional if house value has decreased a bit?
I have a FHA loan on a house we bought for $ 173, cure 000 paying a 5.25% rate. Now rates are even lower so I would like to refinance by 3 year old FHA mortgage. My tax assessment on the property says the house is worth $ 160,000 and I have a principal balance of $ 164,730.

I would rather have a Conventional Mortgage and eliminate the impound accounts. Do I have to have 20% of equity built to get a conventional loan?

Best answer:

Answer by Art Vandelay
The tax appraised value is probably a little below a real estate sale appraisal amount, but close enough for some hypotheticals. The tax appraisal is probably about 85-90% of the market value, though this is just a general guess as each district appraises slightly differently).

If the house is only worth 160,000, you could get a conventional loan of 128,000 (80% of value). This would require you to come up with 36,730 down payment (to pay off the negative equity on the old loan and the 20% down on the new).

Also, if you want to waive the impounds/escrows, you will pay an additional fee for that feature as these are problematic for lenders (people are late paying the insurance or property taxes, notices have to go out, etc. Just a real P.I.T.A. for lenders).

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Question by Dennis: First time Home Buyer and confused. What is the Difference between an 80/20 and an FHA Loan?
I am a first time Home buyer, pill and my Loan Officer is confusing me about an 80/20 and an FHA Loan. To anybody familiar with these terms, more about can somebody explain it to me what these two types of Loans are? And which would be advantagous on my part. Thank you.

Best answer:

Answer by ~Concerned~
FHA federal housing authority affialiated with hud.
80/20 is 80 % of the loan is pd by one lender and 20% by the other basically meaning you have 2 loans. Known as piggy back loan, just helps you qualify for more of a home.
I think your loan officer can answer this better if you ask for a detailed explaination….depending on the home you get would be which loan I would get.
But FHA would be a better way as long as rates are good. FHA loans your less likely to have to produce a down payment.

I had to add this to knowing which program is right for you will depend on several factors. Consider how much money you have available for down payment. Make sure you sit down with your lender so that you clearly understand your budget before looking for a new home. And when “doing the math” for your own situation, be sure to keep in mind that you’ll likely need to cover expenses like earnest money, mortgage insurance and closing costs for the transaction. On a 80/20. FHA loans your less likely to have to produce a down payment.
Sorry I got to thinking about it and had to refurbish.

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One Comment

  1. 80/20 basically is an 80% first t.d. and and 20% second t.d. (100% of the purchase price). Reason why most go with an 80/20 program is because you wont have to pay monthly mortgage insurance. Monthly mortgage insurance is required on most loans over 80% (i.e. FHA).

    FHA requires a 3% down payment (97% financing) and will have mortgage insurance (insurance that protects the lender in case of you defaulting on your loan) in addition to the requirement of also have your monthly insurance and taxes incorporated into your payment.

    FHA loans basically are for borrowers with no so good of a fico, but have an explanation for previous derogatory credit that was a one time occurrence and also has minimal down payment and reserves (most lenders require that borrowers have at least 2 month of mortgage payments (principle, interest, taxes and insurance) as reserve requirement).

    If you have a good fico score and dont want to put any money down, I would go for the 80/20 program (if you can prove your monthly income, and it is good enough to qualify under the lenders debt vs income ratio you would get a better interest rate).