80-20 Loans Are Back!

80-20 Loan Program Guidelines

Loan Purpose

• Purchase only (No refinance allowed)
• No family-member purchase transactions allowed

Product 80/20 Loan

• First Loan: 5/1 ARM, 7/1 ARM, and 10/1 ARM
• Second Loan: Home equity line of credit or HELOC

Credit Profile

• 720 minimum middle credit score
• If more than one borrower on the loan use the lower of the two-middle credit score
• Foreclosure or bankruptcy on credit report not permitted
• Minimum of 3 trade lines, one of which has a 24-month history
  • Can substitute with a Verification of Rent in place of a third tradeline or lacking a 24-month history
• No unpaid public records and collections (including medical). All public records and collections require written explanation
• No judgment, repossessions, or charge-offs in the last 60 months
• No mortgage delinquency

LTV/CLTV

• Maximum calculation at the lesser of the purchase price or appraised value
• Transaction structured as an 80/20 loan
• Combined loan amount cannot exceed current conforming limit plus 20% of the purchase price

Loan Amount

• First mortgage loan amount not to exceed current conventional loan limits
• Second mortgage loan not to exceed 20% of the purchase price

Ratios

• Maximum debt-to-income ratio: 31% front-end/40% back-end
• If 5/1 ARM, monthly mortgage payment based on the initial rate. However, qualifying rate is based on the starting interest rate plus 6%. If the ratios exceed maximum debt-to-income ratio of 31%/40% switch to the 7/1 or 10/1 ARM
• 7/1 or 10/1 ARM qualify at note rate

Property Type

• 1 Unit Single Family Detached, Attached, or Condominiums
• Condominiums must be Agency Guidelines

Occupancy

• Owner occupied only
• All borrowers on the loan must have ownership in and occupy the property
• No co-signers permitted

Property Valuation

• Full appraisal with interior inspection and photos

Documentation

• All loans must be fully documented per Agency Guidelines

Closing Costs

• Minimum borrower contribution toward closing costs must be $1,000
• Seller contribution toward buyers closing costs up to 3% of the purchase price
• Closing costs in excess of the minimum $1,000 required by the homebuyer can come from family member gifts

Terms

• Amortization period:
  • First mortgage: 30 years
  • Second mortgage: 15 years

Existing Properties Owned

• No additional properties can be owned prior to the home purchase using the 80/20 loan