Innovative loan programs can enable borrowers to avoid mortgage insurance on a home loan. Whether purchasing a home or refinancing, a borrower is required to have mortgage insurance on a conventional loan that is 80 percent or more of the appraised value. The Federal Housing Administration will charge a borrower risk-based fees as well on an outstanding loan balance. With MortgageDepot borrowers can apply for a Piggy Back loan program to avoid the cost of mortgage insurance. Eliminating the need for mortgage insurance could save a homeowner thousands of dollars.
Details About the Piggy Back Loan Program
The Piggy Back loan program uses a first mortgage product as well as a second mortgage product to facilitate above-average loan-to-value transactions. While both loans are secured against real property, a borrower can use the combined loan-to-value features of the program to avoid paying mortgage insurance.
Borrowers with a 720 FICO score or greater may apply for a purchase money loan or a rate and term refinance loan on an owner-occupied property or a second home. In fact, the program is available on single-family homes, condos and PUDs as well.
With MortgageDepot borrowers may obtain a mortgage loan for as much as one million dollars via the Piggy Back program. The CLTV thresholds are capped at 89.9 percent of the subject property’s appraisal value.
The Piggy Back loan program does not allow cash-out on the first or the second lien. The program’s maximum loan amount on a fixed-rate home equity loan is $500,000. Borrowers may obtain a home equity line of credit for as much as $350,000.
To avoid mortgage insurance on a purchase transaction, a borrower is generally required to supply certified funds that equal 20 percent of the property’s selling price. The Piggy Back loan program would require less money from the borrower at settlement.
For instance, if the purchase price for a home totaled $500,000, a borrower could use the Piggy Back program to obtain a first mortgage for $400,000 and a second mortgage for $49,500. With secured first and second mortgage liens that respectively equal 89.9 percent of the home’s selling price, the borrower would only need $50,500 to avoid paying mortgage insurance. Otherwise, the borrower would need $100,000 to satisfy the 20 percent down payment requirement on a conventional loan to avoid mortgage insurance. The Piggy Back program might enable a borrower to refinance an existing loan to eliminate mortgage insurance payments too.