SunTrust Bank, one of the lenders we work with, is joining the ranks of other lenders who are eliminating or shelving their second mortgage products, including their combos where they have the first and second mortgage (such as an 80/10/10). Where we once had several options for second mortgages and HELOCs, we are down to just a few.
Another bank that is still offering second mortgages (fixed and HELOCs) are limiting the total loan to value to 80% if your mid-credit score is 680-699. A 700 credit score will allow you to go up to 85% total loan to value.
We do have another option for second mortgages that will go to a higher loan to value with lower credit scores…you pay the price with rates up to 3 points higher than what the other bank offers (with the lower loan to value).
What are your alternatives if you do not have 20 or 15% down?
- Seller financing for a second mortgage (private deed of trust subject to approval with underwriting).
- Private mortgage insurance. Upfront, monthly or lender paid.
- FHA insured mortgages (subject to loan limits which will be changing soon)
- VA insured mortgages
If you are currently preapproved to purchase a home and you are using an 80/10/10 or 80/15/5, I urge you to contact your Mortgage Professional to confirm your preapproval is still valid and to develop a "Plan B" for your home purchase strategy. Some private mortgage insurance companies are also pulling back on higher loan to value mortgages (this includes lpmi and Fannie Flex); if you’re using less than 10% down with a pmi scenario–check with your Mortgage Professional for "Plan B" as well.