WHAT IS PIGGYBACK?

Piggyback is the technique used in the mortgage business to accomplish very specific results when the first mortgage is combined with the second at line of credit. For example. I had a client who was buying a house for $1.9М. He only had 10% for the down payment. Since his loan amount was slightly over $1.7М, which is called jumbo, it had higher interest rate, required mortgage insurance, had a qualifying ratio of 43% and required 6-month reserves, which he did not have.

So, I divided it into two parts. The first mortgage of $1.2М was a conforming loan, hence it had lower interest rates and no mortgage insurance requirement. The remaining $500К was the second loan. It had a higher rate, but allowed combined qualifying ratio to go up to 49%, i.e. a lower income was needed to qualify, and there was no need for the reserves! That is how piggyback works.

Some clients use piggyback loans in anticipation of getting an extra money within short  period of time and the intention to pay the second loan off. We also arrange second loans and lines of credit up to 89.9%, but these serve a different purpose.

Need assistance? Don’t hesitate to contact me – call (415) 225-7920, or email at [email protected] 

Manny Kagan,
President,
Pacific Bay Financial Corporation
Your professional mortgage broker since 1983

NMLS #205637
DRE #00874630