Piggyback loans (80/10/10 or 80/15/5 or 75/20/5 etc)?

[irvinehomeowner]

I was going to ask SGIP this privately but I figured this is something other people might find helpful.

I know back in the Ninja Loan days these were widespread, even to the point where you could put 0% down but that's not what I'm looking for. I'm looking for 5%-10% down.

Why the low down? Am I being irresponsible?

It depends on your outlook but since this whole bubble debacle and in our current economic atmosphere, I'm not a proponent of tying up my cash of 20% or more into real estate. If I can afford the payments (and not some out of whack DTI ratio) then I would rather pay the higher monthly than put most of my liquid assets into my home.

What about FHA?

That is probably the best low-down option but there are some downsides to it:

1. FHA is primarily for SFRs and in Irvine, there are some condos that we really like but are not FHA approved.
2. FHA has a cap of $729k, limiting you to about $800k if you have 10% down... some of the homes we like are higher than that amount.
3. FHA has PMI and from what I've read, you can't remove it until after 5 years of payment. And the PMI is so high now, you may get a better total payment from a primary/secondary loan than an FHA primary+PMI.

A broker has told me that piggybacks have very strict guidelines with DTI and FICO scores and that their rates are usually higher but based on the scenario, it might be better than an FHA.

Here's one example:

Home Price: $770k

FHA: Down = $41k, 5.3% Loan Amount = $729k
80/10/10: Down = $77k, 10% 2nd Loan = $77k, 1st Loan Amount = $616k

The math for the FHA loan (according to my broker) for a 30-year fixed at 3.75% is:

$3500 P&I
$900 PMI

So about $4300 per month (and we can't write off PMI)

For the piggyback (using a 30-year fixed at 5% and a 15-year 2nd at 6%) is:

$3300 P&I 1st
$700 PMI 2nd

So about $4000 per month, except we may be able to write off the interest on both loans and the loan rates/length are probably better than what I calculated. I think one benefit is depending on the price of the home, you can get the primary mortgage down below $625k for a some help in the rates.

So I'm wondering, in California, do piggybacks even exist? Paging SGIP....

 

[Vinster]

If you can put 20% down, it may make more sense to get a HELOC after closing.

For example, Hanscom Federal Credit Union (easy to join), offers a fixed rate HELOC over different periods.

They currently offer a "Fixed Rate Advance - Over 85% LTV" at 5.99% for 10 to 15 years.
https://www.hfcu.org/personal/rates.html

 

[irvinehomeowner]

The problems with HELOCs after the fact is that you may not be sure how much cash out your getting and many HELOCs tend to be variable rates (and not easy to find... just like piggybacks).

If the one you are mentioning is only 85% LTV, then that's only 5% you're getting.

 

[usctrojancpa]

The problems with HELOCs after the fact is that you may not be sure how much cash out your getting and many HELOCs tend to be variable rates (and not easy to find... just like piggybacks).

If the one you are mentioning is only 85% LTV, then that's only 5% you're getting.

US Bank offers HELOCs up to 90% LTV.

 

[Vinster]

The problems with HELOCs after the fact is that you may not be sure how much cash out your getting and many HELOCs tend to be variable rates (and not easy to find... just like piggybacks).

If the one you are mentioning is only 85% LTV, then that's only 5% you're getting.

The HELOC is fixed rate over the term (10 to 15 years) and the amount is "over 85%" so possibly up to 100%.

 

[zovall]

US Bank offers HELOCs up to 90% LTV.

I just signed on a HELOC (will update the HELOC thread in a couple days when final) and 85% LTV was the max as I was told and that matches what they say on the site when I enter numbers to View Rates.  I would have hate to missed out  
Is 90% something they offer during a purchase? 

 

[usctrojancpa]

US Bank offers HELOCs up to 90% LTV.

I just signed on a HELOC (will update the HELOC thread in a couple days when final) and 85% LTV was the max as I was told and that matches what they say on the site when I enter numbers to View Rates.  I would have hate to missed out  
Is 90% something they offer during a purchase? 

I dont think they offer it during a purchase, but you can call and double check.  I'll probably get a HELOC up to 85% for my house later on this year.

 

[sgip]

A number of lenders today offer an 80/10/10 program. There isn't any lower down payment, PMI avoidance program out there BTW.

The funding lender on the 2nd TD is TCF Bank, a Mid-West financial group trying to stir up the market. They've got some pretty strict guidelines - rightly so in this market - and funding isn't assured. Whenever I structure one of these deals I tell everyone it's going to be difficult to close on time. "Difficult" is not "Impossible" so like any unique product, best to be fully informed, not completely surprised. Here's a 10,000 foot overview of the loan, subject to change.

79.9 1st, Jumbo Conforming. 89.9% Combined Loan To Value.
HELOC 2nd. 5.25% rate, qualifies at about 5.50% Principal and Interest. They've got a unique DTI calculation method.
4.75% rate if you're at 85% CLTV
38/45 debt to income ratios. 38.01 / 45.01 is no bueno.
Condos - attached OR detached - must have 75% owner occupancy rates.
$750,000 maximum at 89.9% CLTV
$950,000 maximum at 85% CLTV
720 FICO minimum
A desktop review appraisal is done on every transaction. I've not had an appraisal value fail, but it could happen.

The Agencies add .25% to the rate (or 1.0 point to fee) to the 1st loan due to risk.  Run the numbers between an FHA loan with 95% (1.75% UFMIP, 1.25 or higher MMI) and an 80/10/10 is a winner.

Assume a $650,000 priced home, you could get a 3.5% or lower FHA rate, but with UFMIP and MMI your real rate is considerably higher. You could put 10% down and get a Conventional Jumbo loan at 3.875% today with .6% PMI, or your blended 4.125%/5.25% rate is somewhere in the 4.375% area. Remember at these higher loan amounts, the income required to qualify is so high that you cannot write off PMI. Check with your CPA regarding this question.

The only other option to avoid PMI is to pay it in a lump sum. The cost runs about 1.6255 to 1.875% of the loan amount depending on a great number of factors. I do not at this time recommend this method. Why? If we are in a rising value market, you could possibly pay PMI for 24 more months, then get an appraisal high enough to eliminate the MI. You've got to reach 78% LTV, which is possible in a couple of years.



My .02c

Soylent Green Is People

 

[irvinehomeowner]

Thanks SGIP... if I could double/triple thank your post... I would.

 

[zovall]

US Bank offers HELOCs up to 90% LTV.

I just signed on a HELOC (will update the HELOC thread in a couple days when final) and 85% LTV was the max as I was told and that matches what they say on the site when I enter numbers to View Rates.  I would have hate to missed out  
Is 90% something they offer during a purchase? 

I dont think they offer it during a purchase, but you can call and double check.  I'll probably get a HELOC up to 85% for my house later on this year.

I confirmed with US Bank that 85% is the max in CA.  I'm not sure what you were referring to when you said 90%. 

 

[usctrojancpa]

US Bank offers HELOCs up to 90% LTV.

I just signed on a HELOC (will update the HELOC thread in a couple days when final) and 85% LTV was the max as I was told and that matches what they say on the site when I enter numbers to View Rates.  I would have hate to missed out  
Is 90% something they offer during a purchase? 

I dont think they offer it during a purchase, but you can call and double check.  I'll probably get a HELOC up to 85% for my house later on this year.

I confirmed with US Bank that 85% is the max in CA.  I'm not sure what you were referring to when you said 90%. 

I saw it on FatWallet...someone mentioned US Bank goes up to 90% LTV but I guess it was for some other state/s than CA.

 

[zovall]

US Bank offers HELOCs up to 90% LTV.

I just signed on a HELOC (will update the HELOC thread in a couple days when final) and 85% LTV was the max as I was told and that matches what they say on the site when I enter numbers to View Rates.  I would have hate to missed out  
Is 90% something they offer during a purchase? 

I dont think they offer it during a purchase, but you can call and double check.  I'll probably get a HELOC up to 85% for my house later on this year.

I confirmed with US Bank that 85% is the max in CA.  I'm not sure what you were referring to when you said 90%. 

I saw it on FatWallet...someone mentioned US Bank goes up to 90% LTV but I guess it was for some other state/s than CA.

Ahh, yes, I think 90% must be for some other states.

 

[akim997]

We are using TCF to split our loan.  20% down, but doing a $625K first with balance on the HELOC.  That way I could try to pay down the HELOC and settle into a $625K amortized agency jumbo with $2800 mortgage.  HELOC is variable and is based on prime, but I'm okay with that.  Weighted average interest rate still comes out to 3.9% ish which is better than what I was looking at on putting everything on a standard jumbo.