So what is the 80/20 Rule? That just meant that the buyer would give a 20% downpayment and carry an 80% loan. Mortgage loans have come a long way from having to put a 20% downpayment. No longer is the full 20% required. There are loans awarded with only a 10% or 5% down. FHA loans offer a 3% downpayment requirement.
A couple of years ago, loans were being given for 100-103% of the purchase price assuming a good credit standing. I haven't really seen much of these loans being advertised, but that doesn't mean that they aren't out there.
How does the 80/20 Rule apply to you now? If you take out a loan that is greater than the 80% you will most likely have to pay mortgage insurance on the loan. The insurance is meant to protect the lender in case you default on the loan. You will pay this mortgage insurance until you've paid the 20% (or in the case of FHA loans - 22.5%).
The main thing to get out of this post is that you don't need a 20% downpayment and be aware that there are costs associated with having less than a 20% downpayment.
The best thing to do is contact your lender to see what their terms are and what are the costs of the mortgage insurance and work with your realtor to find the home that is priced right for you. You'll need to factor in all these costs when making your purchase.
Just remember that nothing is impossible and this is your year to turn your dreams into realty!
Coreen K. Nishijo (RA)
The Master's Plan Realty, LLC
ckn0316@hawaiiantel.net
Office: (808) 488-2992
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