80-10-10 Loan: Understanding the Basics


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What is 80/10/10 loan? What are the benefits? What are the qualification requirements? How can you get an 80/10/10 loan?

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80-10-10 Loan: Understanding the Basics

  1. 1. The 80/10/10 Loan Program Shashank Shekhar CEO, Arcus Lending
  2. 2. About Arcus Lending • Arcus Lending is Mortgage Lender based in San Jose, California • Products Offered: Residential Mortgages- FHA, Conventional, VA, 203K, HARP, HomePath, Reve rse Mortgage, CHDAP, 80/10/10 • Geography Served: California, Washington and Oregon • What are they known for: Legendary customer service, quick closing and rates that are consistently better than the leading banks
  3. 3. Ab About Shashank Shekhar • Shashank is the Founder and CEO of Arcus Lending • An Amazon.com Best-selling Author, Shashank is widely regarded as California’s #1 Mortgage Expert • He is a National speaker, and a blogger who is frequently tapped for his expertise by various national and local media including FOX, CBS, ABC and NBC
  4. 4. • The information contained within this document is for educational purposes only. Every attempt has been made to provide accurate, up to date, reliable and complete information. No warranties of any kind are expressed or implied. Readers acknowledge that the author is not engaging in rendering legal, financial or professional advice. Disclaimer
  5. 5. Agenda • What is the 80/10/10 loan? • How does it work? • What are the benefits? • How can you qualify for an 80/10/10 loan? • What are the next steps?
  6. 6. Program Overview • If you have only 10% down payment and do not wish to pay a private mortgage insurance (PMI), 80/10/10 loan may be an option • Usually a 2nd mortgage or a Home Equity Line of Credit (HELOC) is offered up to 90% of the home value. Popularly known as 80/10/10 loans, the first mortgage is 80 percent of the home value, the second mortgage or HELOC is 10 percent and the rest 10 percent is the down payment by the borrower.
  7. 7. What are the benefits? PMI is required on all conventional loans with less than 20% down payment. So if you had 10% down payment and you opted for one loan of 90%, you would end up paying PMI. However an 80/10/10 loan eliminates the need for a mortgage insurance.
  8. 8. How can you qualify? • What are the requirements? – Property must be owner occupied. – A minimum credit score of 700 is required for California (CA), Washington (WA) and Oregon (OR) borrowers. • Some of the additional guidelines for the HELOC is mentioned below: – Maximum loan amount of $350,000 (This is the maximum ONLY for the HELOC. To find the overall maximum loan amount see the chart on the next slide which details the total loan amount allowed (1st mortgage + HELOC), credit score requirements and interest rate over prime).
  9. 9. How can you qualify? The chart below details the total loan amount allowed (1st mortgage + HELOC), credit score requirements and interest rate over prime.
  10. 10. Other Requirements – No foreclosure or bankruptcy in the past 10 years – $50.00 annual maintenance fees – Early termination fee of $475 if the line is closed within 3 years – First 10 years draw period, next 20 years repayment period • Note – Loan is not offered by Arcus Lending, but through an approved lender. Rates and guidelines are subject to change without notice.
  11. 11. Show me the Numbers • Example #1 – Using 80/10/10 loan to avoid PMI Say you are buying a house worth $650,000 and you only have 10% down payment i.e. $65,000. You need a loan amount of $585,000. You can get one loan of 90% and pay mortgage insurance on it. Or you can get two loans – 1st mortgage for 80% i.e. $520,000 and a 2nd mortgage (HELOC) for 10% i.e. $65,000. You don’t pay mortgage insurance on either the 1st or the 2nd mortgage.
  12. 12. • Example #2 – Using 80/10/10 loan to qualify for a higher loan amount Say you wanted to buy a $825,000 house and had only 10% down payment. You won’t qualify for any loan since Jumbo loans (loan amounts higher than conforming limits) require a minimum of 20% down payment. So if your property is in a high cost area and conforming limit is $625,500 – with a 10% down your maximum loan amount can’t exceed $625,500. But with a 80/10/10 loan you can buy a $825,000 house by putting down only 10%. The first loan is not exactly 80% of the home value, but the program still works to help you buy a house like this with only 10% down. Show me the Numbers
  13. 13. • Example #3 – Using 80/10/10 loan to avoid paying jumbo mortgage rates Say you are buying a $900,000 house and have 20% down payment. You can get one loan of $720,000. But you don’t want to exceed the conforming limit and don’t want to pay the higher interest rate of a Jumbo loan. In this example, you can get a $625,500 loan on the 1st (assuming that is the loan limit in your county) and can get a HELOC for $94,500. You are still paying 20% down, so technically its not a 80/10/10 loan. But using a HELOC on the 2nd and splitting the loan into two, you can avoid paying higher interest rate for a Jumbo loan. Show me the Numbers
  14. 14. How do I get an 80/10/10 Loan? • Call (408) 615 0655 • Email: Info@ArcusLending.com • Website: www.ArcusLending.com • Blog: www.LendingExpertBlog.com • FaceBook: www.facebook.com/ArcusLending Licensing Info: Arcus Lending Inc, NMLS ID 1035734 and CA BRE #01857474 Shashank Shekhar NMLS ID 8176