On 2007-05-31, Stan Brown wrote:
The advantage this has over just doing 10% down and borrowing 90% is
that many lenders will require private mortgage insurance then. That
can cost more per month than the payments on the home equity loan in an
80-10-10 arrangement.

Maybe there's something I don't understand(*), but every time I've
dealt with a mortgage bank they've tried pretty hard to make sure the
down payment isn't borrowed money. For instance, a year ago when I
bought my present home I had to show several months' bank statements
to prove that my down payment was savings and not a recent loan.

This scheme essentially means borrowing half the down payment -- and
simultaneously taking on a second mortgage. Does any decent lender
really go for this?

Well, it was Countrywide that suggested 80-10-10 to me. I think a lot
depends on your credit rating. Mine is usually in the 790-805 range at
the 3 big credit reporting services, but at the time I was talking to
Countrywide, it happened to be 830 at the one they checked. When they
saw that, they said I could put away the binder I had brought with tax
returns, several months bank statements, etc. All they needed to see
was my last pay stub and my current balances, and they would approve me
up to a 50% debt to income ratio, and allow things like 80-10-10 if I
didn't feel like making a 20% down payment.

Things probably would have been different with a lower credit score.

(The high credit rating also helped later, when I was actually buying.
They waived requiring an appraisal of the house, saving a few hundred
bucks).