80/20 loans are common in virginia and many other places. above a 80% LTV the lender requires PMI ( mortgage Insurance) which is a sizable down at closing and added $$$ to monthly payment. Most times this is non deductable taxwise.
With an 80/20 loan the rate is higher on the 20% but the interest is a tax deduction. This may work out better for your daughter.
However, I am not aware of any law in TX or anywhere else requiring it this way. It would seem maybe the loan officer is trying to save her some $$$ at closing and payments as well by structuring it this way.
Have you ever heard of a law in Texas, that requires any home purchase which will be 100% financed, that the mortgage be split in 80% and 20% portions(the 20% being at a higher rate than the bulk portion of the mortgage)? Please advise ASAP as our daughter is considering purchasing a home & we would like to know if this is true. Thanks.
I don’t think this is a state law. I think it is an underwriting guideline from the lender. The lender proably wants to be able to package up the first and sell in into the secondary market (Fannie Mae and Freddie Mac). To do this, the loans must conform to the guidelines issuesd by these institutions.