Home Equity Loans
-Conforming Mortgages: Fannie Mae/Freddie Mac
Selling Your Home?
There are two main reasons why someone would utilize two
mortgages for their
home purchase loan. One, dual financing can
keep you within limits for qualifying for a
Fannie Mae/Freddie Mac conforming loan. Two, you can avoid paying mortgage insurance
on a jumbo loan or a conforming loan with piggy-back financing.
Dual financing and
In order to qualify for a conforming loan, the finance amount you
are seeking can not be more than $417,000. Suppose the amount you need
to finance is more than the conforming limit? You can use two
mortgages, known as piggy-back financing, to lessen the difference between the conforming
limit and the purchase price of your home. Your first mortgage would
obviously be a
conforming loan, with your second mortgage likely being some type of
low rate home equity loan.
Here is an example of how dual mortgages work: Let's say you are
going to buy a house for
$575,000, with a down payment of $80,000. The amount needed for
financing will be $495,000. This puts you out of the 2006
conforming limit of $417,000. Therefore you will need some sort of
second mortgage for $78,000 to keep you within the conforming limits.
Dual financing and
Fannie Mae and Freddie Mac require that you will need to put down
at least 20% of the purchase price in order to avoid paying
insurance. If you do not have 20% as a down payment, you can utilize
a loan that is 75-15-10. Meaning, you finance 75% with your first
mortgage and 15% on your second mortgage with a 10% down payment.
With any type of jumbo loan, you will end up paying PMI if you
finance anything greater than 80% of your loan. Jumbo loans are less
strict in the guidelines of dual mortgages. Meaning you can utilize
any combination of financing with piggy-back financing a jumbo loan.
The most common type of dual mortgage is 80-10-10. Meaning your first
loan is 80%, your second loan is 10% and your down-payment is 10%.
Piggy-back financing is a great idea if you plan on
plan on paying off your second mortgage before the loan term ends.
For instance, let's say you anticipate a large inheritance, but want
to buy a home now. So, you take out a second mortgage in the amount
of what your inheritance will be. You can pay off your second loan
once the inheritance is received, leaving you with only a low-rate
Apply for a first mortgage home loan.
Apply for a second mortgage.