First and second mortgage combinations are back and can be a huge help for buyers looking to avoid PMI or exceed conventional loan limits. It allows home buyers to put as little as 5% down on the purchase of a new home. If you are on the market to buy a home, here’s why you should consider 95% financing with first and second mortgages.
Avoiding PMI
Most loans for more than 80% of the purchase price require PMI charges. Homebuyers can avoid this by obtaining two mortgages. The first would be for 80%, thus staying below the PMI threshold, and the second for 15%. This results in only a 5% down payment for a buyer and no PMI charges. Many buyers assume that you cannot obtain more than one mortgage when buying a home, but these programs do exist.
Financing High-priced Homes with Little Money Down
Another great way to use this program is for the purchase of high-priced homes with little money down. Conventional loan programs have mortgage limits based on the county. For instance, in Suffolk County, the limit for a conventional loan is $603,750. If you are looking to purchase a property in Boston, that would be the most that you can borrow. Boston home prices easily exceed one million dollars, thus Boston buyers must often provide significant down payments.
By using 95% financing with first and second mortgages, a buyer can avoid that large down payment. A second mortgage can be granted for as much as $500,000. This allows buyers to purchase a home for as much as $1,161,842 with only 5% down. The first mortgage would be issued for $603,750 (the conventional limit) and the second mortgage for $500,000, leaving only $58,092 as a down payment.
More on 95% Financing with First and Second Mortgages
With interest rates still historically low, buyers may want to keep their down payments low in order to have funds available for other things, like home repairs, paying off higher interest loans, or investing in the stock market. If a low down payment is appealing to you, contact Sierra Pacific Mortgage for more information on 95% financing with first and second mortgages. And if this loan program doesn’t fit your needs, we have many other options to consider. Contact us today for a free pre-approval!
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