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My friend bought a house last year. He was bragging on paying zero down and having a low interest rate and an 80% and a 20 % mortgage. This seemed kind of fishy to me. Are all of these loans ARM’s and are they good loans?

5 Thoughts on Are all zero down 80/20 mortages ARM’s?
  1. Reply
    Rex
    February 7, 2014 at 2:09 pm

    They are bad loans and arms. The 80 will get higher and the 20 is hard money, it is high now. Because he has 2 mortgages he is not eligible for any of the Bushs bail out options.

    Expect him to be in foreclosure soon and have credit so bad he cant rent.

  2. Reply
    MSAD
    February 7, 2014 at 2:26 pm

    Here’s the link for Freddie Mac’s weekly interest rates.
    http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputYr.jsp

    If the interest rate sounds too good to be true – he could have ended up with an ARM or hybrid mortgage.

    The problem with ARM’s is that when the teaser rate expires and your interest rate jacks up and you can’t afford the home anymore. If you plan on living in a home for 5 years or more – an ARM is a really bad idea. If you know you will sell in less than 5 years – then a 5 year ARM may not be bad b/c you will sell before it re-sets.

    With an 80/20 – you avoid PMI but the interest rate on the second mortgage is higher than the primary mortgage.

  3. Reply
    trblmkr30
    February 7, 2014 at 2:53 pm

    No, not all 80/20 loan packages are ARM (Adjustable Rate Mortgages) loans. Some may be, but not all.

    Right now, it’s best to go with a 30 year fixed, as the rates are lower than the equivalent ARMs in most cases.

    Yes, it is possible to get 100% financing, but you will pay a higher interest rate for the sole reason that the loan is riskier than when someone puts money down. Think of it this way: would you consider walking away from a home you’ve put down 20% cash on? You’d have an easier time walking away from a loan that you’ve put nothing down on, as you’re losing much less.

  4. Reply
    lepr0kan
    February 7, 2014 at 3:49 pm

    No they aren’t all Arms. The 80/20 loans allowed people to purchase with 100% financing and not have to pay mortgage insurance. The catch being that the interest rate on the 20 loan is pretty high. Currently these loans are basically non-existent in the market today, now it’s hard to find any 100% loans at all with excellent credit and most lenders require at least some form of down payment.

  5. Reply
    evensonhimself
    February 7, 2014 at 3:59 pm

    the first person to answer this question is the biggest idiot i’ve ever seen answer a question.

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