100% percent financing will soon be going away. Many banks in the past few years have given borrowers two separate mortgages equaling 100% of the purchase price or value. These were know as 80-20 or 75-25 CLTV mortgages.

     This type of loan was created to avoid paying PMI ( Mortgage Insurance). PMI is required when a down payment of less than 20% is put down on a house. The banks would offer a first mortgage of 80% LTV and a second for the balance. The amount of the second mortgage went as high as 20%. This brought the total equity left in a home to 0%.

     Many of the traditional A paper lenders have stopped offering this product. Certainly, the sub-prime lenders will not do the product. There are some lenders that will allow you to do this type of mortgage, but you need to get the second mortgage elsewhere. There are many of my lenders that are offering it, but I fear the product will be eliminated in the next few weeks.

     If you are considering this type of mortgage or have already applied for it, the bank might discontinue the product midstream and NOT GIVE YOU THE LOAN you thought you were getting. Please call your loan officer to discuss this. Better yet, be prepared to have PMI with your loan.PMI is said to be the next industry to get hit by the risky loans. Let’s see what happens next week with this.

– Dale Siegel