Finance
A 'piggyback loan' (80/10/10 financing) allows a Colorado buyer to avoid:
AA. Paying any down payment
BB. Private mortgage insurance (PMI) by keeping the first mortgage at or below 80% LTV✓ Correct
CC. Paying closing costs
DD. Getting a credit check
Explanation
In an 80/10/10 arrangement, the buyer takes a first mortgage for 80% of the value, a second mortgage (piggyback) for 10%, and puts 10% down. Because the first mortgage is at 80% LTV (not exceeding 80%), PMI is not required.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Closing CostsFees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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