80/15/5 (95% Cltv) loan programs are back!

55 Replies

Example:  400,000 purchase price

80% ltv 1st mtg.=  $320,000

15% ltv 2nd mtg.= $60,000

5% down payment= $20,000

Avoids Monthly PMI payment

Very strong financing program for multiple reasons

"Happiness is nothing more than having a bad memory."

-Unknown

I had one of those in 2006

@Steve McRory I'm so looking forward to more of this "Creative Financing" so more risk takers and gamblers can buy houses they can't afford, then I can buy them on the cheap in the next downturn. This type of financing structure requires discipline and long-term planning which most Americans don't have.

@Ray Johnson , what do you mean risky financing? Do you suggest borrowers who can easily get a 95% LTV loan with Non-Tax Deductible monthly PMI avoid doing an 80/15/5?

@Steve McRory I'm simply stating that this type of financing product is very risky. You're pointing out the upside of the product which is easy access to properties, What you're not mentioning is that we've seen this product before and what happens when it's used by a lot of people that don't have the discipline, knowledge, or proper planning to use this type of product.
Originally posted by @Ray Johnson :
@Steve McRory I'm simply stating that this type of financing product is very risky. You're pointing out the upside of the product which is easy access to properties, What you're not mentioning is that we've seen this product before and what happens when it's used by a lot of people that don't have the discipline, knowledge, or proper planning to use this type of product.

How is it any more risky than a 3.5% down FHA?

@Ray Johnson Like many, you are confusing this Fixed Rate, early pay off, NO PMI better tax write off savings, lower fixed EPR (effective payment rate), Ferrari of loans with the No Doc / Interest Only loans (which WERE AWESOME financing tools in the right hands).

An 80/15/5 is a Fannie Mae Fixed Rate 1st mtg, with a Fixed Rate simo 2nd mtg.

If a borrower only has 5% down, good credit, the 80/15/5 is a No Brainer! 

But of course, there are those who think the only way to go is 20% down...period or should just rent.      

@Ray Johnson you are likely an 800+ score borrower, raised by parents who taught you how to save, your are very conservative (likely limiting your potential) and you can buy cash. 

The problem is these days, most of America is not like you and me.  Its PATHETIC actually, that most Americans can't put $5000 on the freakin table here in 2018! 

So what should they do, sit on the sidelines and rent?  These are borrowers who without the Tax Free Appreciation and Tax Write Off Savings of buying a home, won't have a "Pot to P_ _ s In" after this run up in values over the next 7 to 10 yrs!

...."So grandpa McRory, please spear me your growing up during the depression financial advice as it will surely guarantee I'll be poor in the future!  And what the heck am I supposed to do with this stupid nickel you give me when I come over?   And no grandpa, I don't smoke, I'm only 12!

Tax Free Appreciation. LOL

Was somebody in grade school in 2008?

or maybe the majority of America over 45 who can't produce $5,000 from their savings should just continue to rent and start saving like crazy for retirement?

If you are over 45 and aren't in line for a massive inheritance and have less than 300k in retirement savings, you need to change course...Today!  

“you are likely an 800+ score borrower, raised by parents who taught you how to save, your are very conservative (likely limiting your potential) and you can buy cash”

Whoa. 😳 Is something wrong with saving? That’s how I got started and how I’ve bought every property I’ve got.

This is just another sign of impending doom. If you do not learn from the past you are doomed to repeat it. The correction clock is now at 11PM.

I fail to see why people think it is OK to start their investing with a 3.5% down FHA, but NOT a 5% down, 80/15 loan. The 80/15/5 people have MORE down payment, thus have been more responsible. Plus they can more quickly pay off the 15 loan and thus decrease their monthly expenditures.

Saving is great, but if you can't save because you were never taught to save, kinda tough thing to start at 45.

Facts are, Americans are terrible savers, so without the benefits of home purchase, most are going to be working the rest of their lives.

As a Florida Mortgage Broker, unless I'm dealing with a BTR (Born To Rent), I can usually provide make sense loans for borrowers to become homeowners.

But I may present a downright No Brainer program and almost always, I'll have the perfect credit, retired Father, Mother, Uncle  (i.e. the 3rd baseman) initially question the loan...until we compare strategies for borrowers who are not them and not their age, etc.     

@Steve McRory , I agree with @Eric C. in his inference that it's really similar to the FHA 3.5% "rose", but by "any other name". What's the bet that with the higher second mortgage interest rate, it comes out about the same as if you were paying the PMI for that FHA loan instead?

But if you're talking about 95% loans for investing, then those relying on Mike's "Happiness" formula (as if the 2008-9 GFC never happened) might soon be put to the test fairly shortly!...

higher fixed rate 2nd, but it's small money AND paid off in only 15 yrs, then upon last payment of 2nd mtg....BAM....your payment on 2nd goes away and you're left with just your 1st mtg. which you can then start pounding down the principle on it and pay your house off early.

But all that is great, but a person under 45 trying to catch up to where they need to be for retirement  would have to be a financial moron to start knocking down a low tax deductible rate on a home loan vs  investing in IRS, 401Ks, annuities and/or start paying off non-tax deductible debts. 

QUESTION:  what is a better plan that could benefit the average person?

I appreciate you letting me know this type of product is 'back' Steve. If I didn't know about the Fannie Home Ready loan as an option vs FHA (which has MIP forever and is incredibly expensive), this may be an option.

But... you keep mentioning tax benefits.  Sorry, but there aren't any. Unless you plan on paying over our new standard deduction,  which is $24k if married.  Who the heck wants to pay over $12k if single, $24k if married, in mortgage interest every year?  Even if there were 'tax benefits' the rate of return is negative 70%+. Send me $10k, I'll send you back $3k anytime ;)   

I'm also on the wrong side of 45 so I can appreciate your urgency catching up. The important thing is that you're aware of the problem and are addressing it.  Never too late to start!

While these are good for owner/occupants who can handle the monthly payments, I hope lenders don't extend these to investors.  We actually bought our first house back in '95 using a similar product.  It was combining low down/no down loans with non-documented income, phony appraisals, HELOCs and outright fraud that contributed to the mortgage meltdown. 

Back in 2007 I felt strongly that the house of cards was going to fall - if I had only known that you could bet against CDOs . . .

I agree, before you get on a race bike for the first time, you should know that cranking back the throttle in first gear may not end well.  Only experienced riders need apply next time!

My point is though, everybody can pick at the edges of something, but what better chance of getting ahead do most people have unless they purchase a home which is a forced saving, that has a chance to appreciate, thus Dwarfing the monthly interest write off and their attempt to save their way into retirement.

They just need to check my site down the road and when I start advertising 100% Neg Am No Doc programs again....SELL...SELL...SELL, we're about to do it all over again, ...but this time we'll see the cliff coming a mile away and step off the train!

Its one of those, again! Lol

Which bank(s) are offering this program?

@Michael Ablan , being that I'm a Florida Mortgage Broker, that's my Trade Secrets.  

Its kinda like asking a Fishing Guide for his Lowrance coordinates of a realtor for the addresses to great deals on FSBO properties.

This thread is just to alert those who truly understand all the benefits of a 80/15/5 or 75/20/5 or 70/25/5, that these extremely strong financing tools are available now in FL again.

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