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A Blend program is one in which a borrower takes out 2 mortgages for the purchase of a home. There are two main reasons why a borrower would choose a blend mortage.
The first reason is that a blend allows the borrower to make a 10% downpayment and still avoid paying Mortgage Insurance. This can be accomplished with the use of a 2 mortgage for either 10% or 15% of the purchase price depending on the lender. The net result is a first mortgage of either 75% or 80% of the purchase price and a second mortgage for either 10% or 15%.
The second reason one might choose a blend program is that can used to avoid the need for a Jumbo loan program. With this a blend program the borrower utilizes the second mortgage to avoid having the first mortgage exceed the conforming loan limits (which would result in a higher "jumbo" rate)
Example:
1) 80/10/10 Mortgage Program
With this program a borrower needs a downpayment of 10%, he/she then borrowers another 10% in the form of a second mortgage. The rest of the funds needed for the purchase would come from a 1st mortgage of 80% of the purchase price. Because the 1st mortgage is only 80% of the purchase price this loan would not require the borrower to obtain Mortgage Insurance (PMI) for lender
THE BENFITS OF A BLEND MORTGATE
* Allows for a downpayments lower that 20% with no Mortgage Insurance requirement.
* Used to avoid paying higher jumbo rates.
THE DETRACTORS OF A ARM
* The second mortgage is usually at a higher interest rate
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