Core Insights - A piggyback loan involves taking out a second mortgage alongside a primary mortgage to finance a home purchase, allowing buyers to avoid private mortgage insurance (PMI) and jumbo loans [2][3][5] Summary by Sections Definition and Structure - A piggyback loan consists of two mortgages: the primary mortgage typically covers 80% of the home price, while the piggyback loan covers a portion of the down payment, often structured as 80-10-10 [2][6][7] Scenarios for Use - Piggyback loans are beneficial for buyers who cannot afford a 20% down payment to avoid PMI, which can cost between $30 to $70 per $100,000 borrowed [3] - They are also useful for purchasing homes exceeding the conforming loan limit, which is $806,500 in 2025 and will rise to $832,750 in 2026 [4] Types of Piggyback Loans - Piggyback loans can be structured as home equity loans or home equity lines of credit (HELOCs), with home equity loans providing a lump sum and HELOCs offering a revolving line of credit [9][10][11] Pros and Cons - Advantages include lower upfront cash requirements, avoidance of PMI, and the ability to stay within conforming loan limits [12][18] - Disadvantages include potentially higher interest rates on the second mortgage, stricter qualification requirements, and the need to pay closing costs for both loans [12][18] Qualification Criteria - Qualifying for a piggyback loan typically requires a good credit score (usually 700 or higher) and a debt-to-income ratio (DTI) of 43% or lower [15][16] Alternatives to Piggyback Loans - Alternatives include FHA loans, USDA loans, VA loans, and conventional loans with lower down payment options, which may be more accessible for some buyers [19][20][21][22] Refinancing Options - Piggyback loans can be refinanced to obtain lower interest rates or consolidate into a single mortgage, but this typically requires a good credit score and sufficient home equity [23]