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What options do you have if you don’t have a big down payment and want to avoid Private Mortgage Insurance? Before making your decision to buy your house, spend some time thinking about how paying mortgage insurance stacks up against using a combo loan.

Use a combo loan to avoid mortgage insurance.

No, this isn’t an order at a fast food restaurant. A combo loan is a solution for homebuyers who can’t afford to put down 20 percent on a conventional home loan but can put down at least 5 percent.

“The homebuyer receives additional financing through a second mortgage that can be combined in different ways,” said Troy Clute, VP of Home Loan Center at Numerica Credit Union. “It’s kind of a ‘small, medium or large option’ if you will, and offers flexible home financing to fit the member’s needs.”

To break it down, a conventional loan would be used for 80 percent of the home loan. You would then put either 5, 10, or 15 percent down and then finance the rest through a second mortgage. This option lets the homebuyer avoid mortgage insurance.

A combo loan was just the solution Sharon Cramer and Daryl Reames were looking for.

They were looking to build their dream home. But when they found the perfect spot, they learned they had to buy the house and adjacent parcel of land that was next to it as well.

“Because we were purchasing land, we had to put down 25 percent, so the option of only having to put down 5 percent for the house allowed us to make the needed renovations,” explained Cramer.

Advantages of a combo loan

More buying power. 

A combo loan gives you the ability to avoid mortgage insurance, which makes those extra dollars go further so you can afford more home.

“The house was a time bomb! Dark, dungeon light fixtures and no updates since it was built in 1972. Renovations were a must. Trying to figure out how to pay for the down payments and make the needed renovations was overwhelming. In our case, a combo loan let us make the down payments and still do the needed rehab. The combo loan gave us much-needed breathing room. ”

Flexibility to pay down the loan principal. 

One of the major combo loan benefits is that instead of essentially paying interest, you have the option to focus your energy on that second mortgage payment and attack the heart of the loan quicker.

How does a combo loan stack up for you?

Take a look with our calculator.

The winning combo (loan) team

Cramer wasn’t originally looking at a combo loan. It was a series of closed doors that led her down this path.

“My husband and I had been with a big bank for years. We don’t carry much debt and pay for almost everything in cash. We had started to lay the path for this home loan by beefing up our credit score with a credit card and a home improvement loan. We were denied! It was crazy. So, we walked over to Numerica, and they worked with us. Naturally, we came back when we needed the loan because of the great customer service.”

The road to well-being had many twists and turns. Creating a team was essential for Cramer.

“You need a good financial partner and a good realtor. We started off with a completely different plan,” said Cramer. “Working together as a team, Numerica and our realtor, Debra Doonan, made our dreams come true and were invaluable.”

Looking to get into the home of your dreams? Numerica has home loan solutions and innovative home loan staff that reduce stress and help you live well.