Combo loan or 30 year fixed 1 loan

What is better, going with an 80/20 combo loan or going with a 30 year fixed 1 loan? There are many factors that will determine which is the better option. Rates, PMI, loan terms and many other factors will help to determine which is the better option.

One thing to consider with 80/20 combo loans is that there will be 2 sets of closing costs, since each is treated as separate transaction. You mortgage professional should be able to give you a blended rate to know what your interest rate is for the entire loan amount. Also, you will paying 2 lenders per month.

The first thing to look at is the monthly payment: which type of program is more affordable? If you can afford to pay down the 20% portion of your loan rather quickly, that option may work for you. The main thing to do obtain a Good faith estimate for both programs in order to compare them.

Combo loans are increasingly becoming a favorite loan program for first time home buyers and home buyers who do not have enough money to come up with a down payment. These types of combo loans are commonly referred to as 80/20 loans and 100% financing combo loans.

In today's contracting credit market, terms for 1 loan are becoming more attractive than combo loan financing. In many cases, PMI can now be tax deductible as well.

Many second mortgages in a combo loan are balloon mortgages. This means that all they are based on a 30 yr term they may need to be paid in full in 15 years. Always ask your mortgage broker the terms of the second mortgage.

You usually have the option of having one loan, or two loans with the first being up to 80% of the value of the home. Have a mortgage broker compare the pricing of the two scenarios to determine which is better for your situation.

You will find in most scenarios that the rate on the 1st mortgage of a combo loan will be more attractive than the rate you would receive on a single loan amount at a higher Loan To Value ratio. Another benefit in selecting a combo loan is that as long as your first loan amount is at 80% of the value of the home or lower (80% LTV,)you will not need to pay private mortgage insurance on an A Paper or(good credit,)loan.

It should be noted by any upstanding mortgage professional however, that purchasing a home using 100% financing, whether using one or two loan amounts, is not without its risks. In a down market or market in which values are stagnant or decreasing, a homeowner could actually end up owing more on their home than the home is worth. This is also known is being "upside down," on your mortgage.

It is wise to discuss all possible risks and benefits with your mortgage professional when you are preparing to purchase a home.

30 year fixed 1 loan options are more attractive than ever however the majority of 100% 30 year fixed 1 loan options require mortgage insurance, which while currently tax deductible in many cases, can be expensive for borrowers with lower credits scores (below 720).

» DISCLAIMER: The information contained in this article on 'Combo loan or 30 year fixed 1 loan' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.