Rex HomeBuyer vs. 90% Loans vs. Piggyback 80/10/10

Doubling your down payment with REX HomeBuyer offers unique advantages.

Qualifying for a home loan requires both sufficient cash for a down payment and monthly income high enough to support the mortgage payments.   Lenders seeking to expand the range of potential homebuyers who can qualify to buy homes have extended their offerings to include more low down payment options. Options include 90% jumbo loans on home purchases well over a $1 million and “piggy-back” loans.  Both of these programs will allow a buyer to purchase with less than the traditional 20% down.  Neither does much to help lower the monthly payment to make it easier for a buyer with a given income to qualify.

“We do not look at our piggyback program at all as an affordability type of product,” said Tom Wind, the executive vice president for home lending at EverBank Financial in Jacksonville, Fla.” – New York Times Dec. 19, 2014

There is a third alternative: an equity investment in the form of down payment funding from REX HomeBuyer. Unlike either of the loan options, an equity investment both lowers the down payment cash required and the monthly payment, so more buyers can qualify for financing on a given home purchase price.

Primary mortgages with up to 90% loan-to-value have been available for lower balance loans continually for decades, but in the upper end of the market down payment requirements had stayed at 20% or more since the housing bubble burst.  Lenders are now opening up the availability of these loans on houses priced up to $1.5 million. Loans for an amount that is greater than 80% of a home’s price frequently require mortgage insurance, which adds to the total monthly housing payment.  When this is the case, the advantage of the lower down payment is somewhat offset by the increased monthly payment plus the mortgage insurance.

Alternatively, some lenders are offering piggyback mortgages, which accomplish the same 90% loan-to-value financing.  These mortgages are essentially a two-loan package.  A combination of an 80% first mortgage, a 10% second mortgage and a 10% down payment is a common. This type of loan package does not help much with affordability either.

An equity investment like REX HomeBuyer offers a more affordable alternative. It allows you to buy with 10% down and lowers the monthly payment, making it easier to qualify. With REX HomeBuyer you finance 80% of the home’s price with a mortgage and make a 20% down payment, 10% from you 10% from FirstREX. The 10% from FirstREX, however, is not a loan. It’s an equity investment, which means there are no interest or monthly payments on that amount. You aren’t paying a monthly mortgage insurance premium either. Instead, FirstREX earns a return on its investment by sharing in the change in value of your home, up or down, when you eventually sell, up to 30 years later.  FirstREX is essentially co-investing with you with the expectation that you home’s value will appreciate, and sharing the risk with you that your home may not.

If you’re a buyer unsure of qualifying for a loan, the combination of the 10% down payment requirement, and the smaller monthly payment on the smaller loan balance may make the difference between getting the home you really want or settling for less. REX HomeBuyer is available with loans from participating lenders in CA, OR, WA, and DC, Maryland & Virginia. Check it out.