4 Reasons a 2nd Mortgage Maybe The Best Option When Buying a Home

Mortgage and Lending with www.DaveYourMortgageGuy.com - Legend Lending NMLS #293883

When getting a mortgage you will want to know all your options?  And of course you want to make sure you are choosing the best mortgage for your needs.  Many times I hear that other banks do not offer 2nd mortgages or that they do not exist.  I am here to say they do exist and to explain when getting a 2nd mortgage could be best for you. 

Jumbo Loan                  

A jumbo loan is considered any loan over $417k.  So what do you do if you loan amount is over $417k?  You could get a Jumbo mortgage, but the rate for a Jumbo Mortgage is usually higher then a normal loan on a 30yr fixed rate.  But if your total loan amount is small enough you can split the loan into 2 loans.  You can keep the first loan at $417k and get a 2nd mortgage for the difference.  As an example, you have a $500,000 home sales price, you could do a first mortgage at $400k(80%) and a 2nd mortgage for $75,000.  Not only could your rate be higher with a Jumbo mortgage but they also require a larger down payment then convnetional loans.  These two benefits make it a win-win situation when you are trying to avoid a jumbo mortgage. 

Waiving your Escrow account

Waiving your escrow account means to not include your taxes and insurance in your payment.  The only way to do this is to put a down payment of 20% or have 20%+ equity in your home if you are refinancing.  Or you could use a 2nd mortgage to make up that 20%.  As an example, your home is worth $200k and you need a new loan of $190k.  based on this you would need to include your taxes and insurance in your payment.  Or.... You could do a first mortgage of $160,000(80%) and a second mortgage of $30,000.  This would allow you to not include your taxes and insurance in your payment

Avoiding Mortgage Insurance

If you get a conventional loan for more than 80% loan to value(less than 20% down payment), you will have the dreaded Mortgage Insurance.  Unless you get two loans.  Another example, you only want to put a 5% down payment.  So you would want to do a first mortgage for 80% of the sales price and a second mortgage for 15% of the sales price. 

A Lower Payment 

Some times getting a 2nd mortgage will allow you to get a lower payment.  Just like our example under "Jumbo Loans".  But you can also save on your monthly payment if you are not getting a Jumbo loan.  Let's say you are buying a home of $200k with a 5% down payment.  If you chose to get one loan with mortgage insurance your payment would be about higher then a mortgage option of two loans.


Keep in mind 2nd mortgages are not for everyone.  You have to have great credit(680+).  They expect you to have money in the bank for reserves and there may be other requirements.  A rate on a 2nd mortgage can be from 5% to 9%.  And the min loan amount is $10k to a max of $100k(sometimes higher).  Our home is our biggest asset, make sure you are getting the best mortgage for that home.  Whether you are buying a new home or refinancing that home, call me today to make sure you are getting the best mortgage possible.

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David Krichmar 

Mortgage Banker NMLS#293883 

Legend Home Lending

LLC NMLS #229421

Has Written For Realtor Magazine, Houston Agent Magazine, Scotsman Mortgage Guide

Appeared On Fox Business


Named 5 Star Mortgage Professional 2013, 2014, 2015, 2016, 2017

Named Top Mortgage Professional 2010,2011




For More Mortgage Info Follow me at  Dave's Blog


If you are looking for a FHA, VA, USDA, Homepath, Conventional, Jumbo, Construction, FHA 203k mortgage in Fort Bend County, Sugar Land, Houston, Katy, Harris County, Brazoria County, Pearland, Richmond, Bellaire, West University, The Woodlands, Kingwood, Friendswood, Clear Lake, Galveston, Fulshear, Tomball, Spring, Conroe, Montgomery County or anywhere in Texas I am your GUY!  


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