What does 85 /10/5 mean in a mortgage financing account?
Answer:
The first answer is correct - Your first mortgage will be 85 percent with a 2nd of 10 percent and the seller doing a 5 percent. Now my question is this? Is the seller going to forgive the 5 percent - What that means is the lender does a 85/10 and after the closing, the 5 percent is forgiven (now owned) and it is not recorded at the court house. That is called creative financing. What is your middle credit score? Why is the lender you are approved with going with the 85/10/5 ?? Just curious! You can get a 95 loan (with no MI insurance) with some lenders. Some companies will give a client a 80/10 or 80/15/5 so a client does not have MI insurance. What is the rate on the First and 2nd? Have you calculated what your payment is. And is the seller willing to forgive the 5 percent, if not - you may want to shop around.But if you shop please read the following.
Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.
Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.
Lenders look at the middle score to qualify a person - With a 580 or higher you can get a 100 percent loan. If your credit is low, than you will be going SUB-Prime, and any amount over 80 percent does not have MI - There are alot of companies I underwrite for that does NOT charge MI - normally the rate is slightly higher. Say you got qualified and your rate was 8.50 at par (Par, means that is what rate the lender quotes you, with no addon's to the rate for the lender to make pts on the back - some Lo"s add pts on the rate to make their money - instead of charging it up front). The 8.50 does not have MI included. This is a estimate only - ok -
If you go with a FHA loan, FHA has MI included. (With a 580 + you will be going sub-prime the rates are higher by about a 1 percent, but you have no MI. (MI is mortgage insurance in case you default on the loan, it is a way for lenders to have added insurance. It is not the same as Home Owners insurance, ok) VA loans do not have MI insurance.
Conforming A+ borrower's loans have MI included, but the rates are better starting in the mid to high 6's (with rates going up.) The more money you borrow - the higher the rate normally. There are a lot of factors involved.
With a government loan - collections and judgements will have to be paid (most ppl do not know that) but for FHA it is true..
http://www.fanniemaefoundation.org/..
http://www.fha-home-loans.com/
http://www.freddiemac.com/
I hope this information helped. Good Luck, and if I can help in any way check out my web site, for links to all the credit reporting agency's and other useful information. This is not an advertisement - just helpful information for you..
It means that you are doing a 100% Financing. Your first mortgage will be 85% and the second will be 10% and the 5% the seller will be carrying. Hope this information was helpful to you.
Not sure read some mortgage tips and more on this site
I could be wrong, but I assumed a 85/10/5 meant that the bank loaned 85% of the purchase price as first mortgage, 10% as a 2nd mortgage (likely at a higher rate), and the buyer puts down a 5% down payment.
I bought my first residence with an 80/15/5 loan product, where the bank loaned 80% as a first mortgage with a 30-yr term at 7.5%, 15 % of the purchase price of the house as a 2nd mortgage/home equity loan at 9% with a 20-yr term, and we put down 5% as a down payment.
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