General Mortgage Knowledge · 20% of the SAFE exammedium
Correct answer: First mortgage of $320,000, second mortgage of $40,000, down payment of $40,000 — avoids PMI
An 80-10-10 structure means: 80% first mortgage = $320,000; 10% second mortgage (piggyback) = $40,000; 10% down payment = $40,000. The key benefit is that the first mortgage stays at exactly 80% LTV, which avoids PMI entirely. The second mortgage takes the place of what would otherwise be needed as additional down payment to reach 80% LTV. "First mortgage of $320,000, second mortgage of $40,0..." is incorrect — the first mortgage in an 80-10-10 is $320,000 (80%), not $360,000. "First mortgage of $320,000, second mortgage of $40,0..." is incorrect — PMI is NOT required when the first mortgage LTV is exactly 80%; that is the entire purpose of the structure. "First mortgage of $360,000, second mortgage of $40,0..." is incorrect — the second mortgage in a piggyback structure covers equity/down payment, not closing costs.
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