These were home loans that were essentially creative ways to get around the rule that you must pay Private Mortgage Insurance if you put less than 20% cash down on a home purchase. They were the darlings of the market in the late 90’s and early 2000’s.
Lenders issued the buyer two loans. Loan #1 was for 80% of the purchase price; Loan #2 was for the remaining 20% of the price. For buyers with 5% cash down, the lender issued an 80% loan and another 15% loan. Voila! No PMI payment required. This also made the monthly payment more affordable, since PMI payments can add $50 or $100 (or more) to the monthly payment.
80/20’s and 80/15/5’s are totally gone since the credit crunch of early 2007 changed the lending landscape. See my friend Shailesh Ghimire, The AZ Mortgage Guru for more on how these loans are totally unavailable.
Related Posts: Real Estate Glossary - PMI, FAQ files
Heather Barr is a Realtor. She's a chow hound, a gym rat, and the only political junkie in the USA who can actually keep her political views to herself. Instead, she focuses on educating her clients about the often-confusing world of residential real estate.
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You are way off. The 80-15-5 is still well and alive in constantly solid real estate markets (e.g. midwest major university towns). Some of us, thank God, are more insulated from the real estate meltdown.