If you have been holding off purchasing your home because you don’t have the cash on hand for a down payment, there are programs to help you qualify for the home loan. The most popular no money down program is the 80/20 or “piggyback” loan. Here are the basics you need to know about no money down home buying that will help save you money.

No money down mortgage loans have been around for sometime now; however, these loans have had a major disadvantage in that the lenders would require you to purchase Private Mortgage Insurance as a condition of approval for the loan. Private Mortgage Insurance is expensive and does nothing to protect the homeowner, only the mortgage lender.

80/20 mortgage loans do not require the borrower to purchase private mortgage insurance. The reason for this is that when you borrow with an 80/20 mortgage you are actually taking out two loans. Your primary mortgage will be for 80 percent of the purchase price and the remaining 20 percent will be from a second lender. Because you are taking out two loans to fund the purchase of your home, you will have two monthly payments to make.

Because you will have the necessary down payment in the form of your “piggyback” loan, you will qualify for a better interest rate on your primary mortgage loan. The interest rate on your second loan will be higher because this lender assumes more risk than your primary mortgage lender. There are options available for the piggyback loan; you may have the choice of interest only payments, an adjustable interest rate, and a home equity line of credit for this loan. If you choose one of these options for your second loan you may have to pay a higher interest rate, so it pays to shop around before choosing a lender. You can learn more about your home loan options by registering for a free home loan guidebook.