Posted by Anonymous on 6/1/06 9:54am
Msg #123412

1st and 2nd

What exactly is a "First and Second"?

T.I.A.

Reply by Ndwa on 6/1/06 9:57am
Msg #123415

AKA piggy back, combo, double, or 80/20 where you'd have 2 sets of loan to be signed.

Reply by Reem Al-Hindi on 6/1/06 9:59am
Msg #123416

i asked the same quetion 2 days ago here and I got it but did not get the 80/20 part or 2/28 or 5/ something?

Reply by CMS_NY on 6/1/06 10:07am
Msg #123423

An 80/20 is the type of loan package the borrower went with their Loan Officer. The "80" is 80 percent of a 1st Mortgage and the "20" is 20 percent of a 2nd Mortgage.

So, for a $100,000 loan amount the borrower would obtain an $80,000 mortgage on a first (generally with a LOWER interest rate) and a $20,000 mortgage on a second (generally with a higher interest rate than the first).

2/28's are mortgages where they are FIXED for 2 Years, then turn to an ADJUSTABLE Rate for 28 years. (Which would total a 30 year mortgage). On these types of mortgages borrower's usually obtain a lower interest rate than a 30 year fixed for the first two years....most borrower's generally refinance before the rate starts to adjust.

Reply by ReneeK_MI on 6/2/06 5:35am
Msg #123589

just a little tweaking - an 80/20 combo is a first that is 80% of the VALUE of the property, and a second that's 20%. This is what is called the "loan-to-value-ratio", or LTV.

If they were to simply obtain a first for an LTV of 100%, they would have to pay PMI (Private Mtg Ins, a/k/a MIP for Mtg Ins Premium). PMI is placed on loans with an LTV higher than 80%. This is ins for the mtgee, to absorb the increased risk that exists with 100% loans. By breaking the financing down to TWO loans, at 80/20%, they escape the PMI, which can be a considerable amount.

Reply by hcampersFL on 6/2/06 6:34am
Msg #123595

Not to mention the PMI isn't tax deductible. Thanks Renee!

Reply by PAW on 6/2/06 8:06am
Msg #123604

FYI - PMI is not quite the same as MIP

FHA Mortgage Insurance Premium (MIP) and the Private Mortgage Insurance (PMI) are different when it comes to cancellation. All loans closed on or after January 1, 2001, the FHA MIP automatically cancels once the borrower’s LTV reaches 78.0%. The borrower must understand that if they reach their 78.0% before they have paid the MIP for 5 years, this insurance will not cancel until the day after the 5 th year. FHA’s minimum seasoning requirement for the MIP is 5 years. It could take a borrower much longer than 5 years to reach 22% equity paid into their property. FHA does not consider new appraisals for the cancellation of the MIP.

The automatic cancellation does not apply to all loans closed prior to January 1, 2001. The FHA MIP cancellation is based on what their LTV was at closing. Normally, with these loans, the MIP will remain on the borrower’s loan for the life-of-the-loan.

Avoiding PMI: The 80/10/10 or 80/15/5 approach, which stands for an 80% First mortgage, a 10% 2nd mortgage, and 10% or 5% down payment or equity in the property. This is the best method in my opinion and the one I see most often. Since PMI only applies to first trusts or primary mortgages, the lender structures a first trust to be no greater than 80% of the value of the property, and then couple that with a second trust for the remaining moneys that are needed. Thereby achieving the total dollar amount needed to make the loan but also waving the need for PMI by keeping the first trust at 80% Loan To Value.