In order to finance a property 100 percent, most all mortgage companies will use a first mortgage of 80% of the value of the purchase and 20% of the value as a second mortgage. There are loans at 100% of the value of the property as one loan, but the monthly mortgage insurance can be as high as 1.20% of the loan per year. It is more economical to obtain two loans and accomplish the same finance.

Whenever a first mortgage is more than 80% of the value of the property, Mortgage companies charge mortgage insurance. Mortgage insurance covers the mortgage in case of loss in foreclosure.

Mortgage insurance (M.I. or P.M.I) is a percentage of a loan charged on a monthly bases included as part of the loan payment. Mortgage insurance is not interest and therefore is not tax deductible.

Many times a mortgage loan program will add a percentage to the interest rate to cover the mortgage insurance instead of the monthly amount. This allows for the extra charge to be tax deductible since it is part of the interest rate and the mortgage bank is covered.

Closing costs cannot be financed in the loans. Closing costs can be added to a sales price and thereby obtaining a higher first and second loan. Or, a seller can offer to pay any part the buyers closing costs. There limitations on some loan programs as to amount that a seller can pay of the buyer’s closing costs.

The first mortgage can be any program ARM or 30 years fixed loan and the second loan can be a HELOC or a fixed rate second.