Typically, anytime a buyer puts down less than 20% down on a home, they have to purchase private mortgage insurance (PMI). Because this type of insurance can be expensive, many buyers attempt to avoid it by putting down at least 20%. Of course, this isn’t feasible for all borrowers — especially first time buyers!
One popular way to avoid PMI is to obtain a second mortgage. To qualify for this, you would need to put 10% down (of your own funds) and then take out a second mortgage for the additional 10%. Added together, these funds equal 20% and allow the borrower to meet the threshold of 20% to avoid PMI.
Any loan amount greater than $417,000 requires a Jumbo loan, and these borrowers are also eligible for this method of avoiding PMI. The same rules apply, although in this scenario, the second mortgage may be greater than 10% so that you can reduce the first loan to $417,000.
Interested in learning more? Be sure to contact Mark Mawby, VP of Lending at Freedom Mortgage, at mark.mawby@freedommortgage.com