Sep 10
12
Mortgage Lending in Nashville
Nashville has proven to be a wonderful place to live through the years. Stable home values and more culture than you can shake a stick at makes Nashville a great place to have a home. Given the current economic state and unpredictable housing industry it is more important than ever to have a trusted mortgage broker. There have been some bad mortgages practices even here in Nashville. My assement of a mortgage broker that you can trust is one that will tell you the truth about your financial circumstances rather than try to sell you on whatever loan will make him the most points.
That being said I would like to try to give out some helpful loan knowledge for next time someone is trying to sell you on something. I will explain an 80/20 loan.
Pat yourself on the back if you have already noticed that the two numbers in an 80/20 loan add up to 100. Feel free to eat an extra cookie today if you guessed that the 100 number that you get from adding 80 and 20 stands for 100%. That’s right an 80/20 loan is actually 2 loans, one loan of 80% of the home’s value and the other consisting of the remaining 20%.
This may seem like a waste of time to have 2 loans with the existance of 100% loans, but there is a method to the madness. A 100% loan is a high risk investment for both the bank and the borrower. Therefore the bank requires the borrower to pay a mortgage insurance premium round about $80 monthly to help compensate for the risk of the loan. The way to not be in the penalty requiring the payment of a mortgage insurance premium is to only owe 80% of the total value of your home. Yes that is the big reason for the 80/20 loan. It is a way to get, in essence, a 100% loan without having to pay the extra $80 monthly in mortgage insurance to the bank. I don’t really have have a problem with the 80/20 concept, other than the fact that it’s a 100% loan.
The last aspect of 80/20’s that I deem worth mentioning in that the 2nd loan that is given for the remaining 20% of the loan can be kinda hairy. In my experience they can be 3 or 5 year adjustable rate mortgages, which is a discussion for another time. This 20% loan in an 80/20 mortgage is the one that you want to make sure nothing strange gets slipped past you with. Since it is only effecting 20% of the loan many people overlook long term possibilities. A common increase in monthly payment down the road could end up eventually eating up the $80 a month that you were trying to avoid paying in the first place.
Hope this has helped your loan vocabulary. Remember, talk to a trusted Nashville Mortgage Broker. It’s a big decision.
Check out Murfreesboro Mortgage for news on Mortgages in Murfreesboro.
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