While we still try to find solutions to what is happening in the housing market the fact remains that there is much left to talk about. The day of doing the 80/20 loan is gone, and if you don’t know what that means then be thankful. There are many homeowners who filed bankruptcies that included a second mortgage, and with the court voiding out second mortgages, that market might just disappear.
The 80/20 Mortgage Plan
The 80/20 mortgage plan was a great idea in theory, because it allowed those buying a home or refinancing to do so at 100% of the home’s value without paying that nasty little thing called PMI or Private Mortgage Insurance. Those who were buying or wanted to refinance using the home’s entire value, didn’t want to pay any extra money out, and while I wouldn’t want to either, the fact remains that many who refinanced at 100% loan to value are buried in their homes.
The way the mortgages were set up was an 80% first mortgage loan, and a 20% second mortgage loan. The second mortgage was always a higher interest rate simply because a second mortgage was a high risk mortgage. The second mortgage uses more value in the home, and as a result credit scores had to be fairly high in order to do a second mortgage. The problem was on the 80/20 mortgage plan that many of these were done by the subprime lenders.
There were plenty of other lenders that were doing an 80/20 mortgage plan too, but the difference was that when the borrower had good credit they ended up with a lower interest rate on the first when they were done by a conventional lender.
Why FHA is a Better Deal for You
The day of the 80/20 mortgage is gone, and thankfully you don’t have to worry about it when applying for an FHA loan. The FHA doesn’t promote this type of lending, and they never will. These loans are not ideal for any borrower, especially in this type of market. The FHA has a goal to get families into homes, and to keep them in their homes. There isn’t any other way to look at it. You get one mortgage loan to finance the home, and other than that you don’t worry about anything. The FHA also has the most competitive rates in the industry and seeks to put borrowers in a strong position to buy their home, and have manageable payments that they can afford based on a number of qualifying factors.
In conclusion, while many of these loans were done with good intentions, the fact remains that they failed miserably. There is a solution to getting a better loan, and that solution is loans that are insured by the FHA. You can find out more about getting your loan solution by going to www.projectbrooklynhomeowner.com. You can fill out a short form and a representative will return your call, and you will be on your way to owning your first home!
Tags: conventional lender, fha loan, first mortgage, mortgage loan, mortgage market, mortgage plan, private mortgage insurance, second mortgage, second mortgages, subprime lenders