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Question About Home Purchase,PMI, and Appraisal Value
Posted on 9/13/12 at 11:50 am
Posted on 9/13/12 at 11:50 am
Okay, I am in the process of buying a home, for sale by owner.
The couple told me that they recently had the house appraised at $205,000. They are asking $165,000. Me and my wife can not afford to put down the 20% to avoid PMI, but we can put down about 10%.
My question is this:
Since the purchase price is already at 80% of appraisal, would that affect me having to pay PMI since I would technically have at least 20% equity in the house from the start? Could this also affect how much our down payment would have to be (5% or 10%)?
**This is assuming that the appraisal value the bank comes up with is in the ballpark of the original appraisal.
Any help is greatly appreciated!
The couple told me that they recently had the house appraised at $205,000. They are asking $165,000. Me and my wife can not afford to put down the 20% to avoid PMI, but we can put down about 10%.
My question is this:
Since the purchase price is already at 80% of appraisal, would that affect me having to pay PMI since I would technically have at least 20% equity in the house from the start? Could this also affect how much our down payment would have to be (5% or 10%)?
**This is assuming that the appraisal value the bank comes up with is in the ballpark of the original appraisal.
Any help is greatly appreciated!
3
Posted on 9/13/12 at 11:54 am to SLafourche07
The bank will consider the true value to be what you paid for it, not the appraisal, and that's what the PMI calculation will be based on.
Posted on 9/13/12 at 12:01 pm to WikiTiger
Thanks. That's what I thought. A few people had just told me that when talking to them, but it didn't sound right to me.
Posted on 9/13/12 at 12:02 pm to SLafourche07
offer them 205 but with a 40K seller assist. I think there is a limit and you won't be able to do 40K seller assist to get you out of PMI, but you follow where I'm going..offer above the 165 but with the extra as a seller assist.
Posted on 9/13/12 at 12:04 pm to dillpickleLSU
that type of loan does not exist anymore.
Posted on 9/13/12 at 12:06 pm to dillpickleLSU
quote:
offer them 205 but with a 40K seller assist. I think there is a limit and you won't be able to do 40K seller assist to get you out of PMI, but you follow where I'm going..offer above the 165 but with the extra as a seller assist.
I excited.
quote:
that type of loan does not exist anymore.
I not excited no more.
Posted on 9/13/12 at 12:23 pm to SLafourche07
Try to do an 80/10 to avoid PMI.
Posted on 9/13/12 at 1:39 pm to SLafourche07
sorry but home loans these days are not complicated you cant think outside the box. Also people are to scared of PMI. if you are putting 10% down and have a credit score above 740 PMI is not that expensive. i just closed a 170k purchase and the customer put 5% down and had a 750 credit her PMI payment on the loans was $125 a month..it would have been double that if she would have gone with a FHA loan. talk to a mortgage banker and get some real numbers it will help your decision making alot. 2nd mortgages have higher rates so it may not make since to take out the seo
Posted on 9/13/12 at 2:35 pm to SLafourche07
I'm no mortgage expert but you may want to check into a Lender Paid MI Loan.
5% down with no PMI. That way you avoid the PMI without having to put 20% down. The only problem with a Lender Paid MI Loan is it never goes away unlike PMI. But with interest rates so low it looks pretty attractive.
Just a thought.
5% down with no PMI. That way you avoid the PMI without having to put 20% down. The only problem with a Lender Paid MI Loan is it never goes away unlike PMI. But with interest rates so low it looks pretty attractive.
Just a thought.
Posted on 9/13/12 at 2:42 pm to WikiTiger
(no message)
This post was edited on 11/29/12 at 3:26 pm
Posted on 9/13/12 at 2:44 pm to KG6
quote:
Where does the "true value" of the house come from if not the appraisal? I don't really understand that.
It just goes back to the concept that an item is worth what a person is willing to pay for it.
If a house appraises for $205,000 but only sells for $165,000, then they view it as being only worth $165,000.
And yea, I know it's kind of messed up. All it really does it show you how much bullshite the appraisal industry is.
Posted on 9/13/12 at 2:45 pm to KG6
You have to be in the house at least 6 months before you can cash out the equity. also most equity lines of credit limit themselves to 90% of the homes value so if he only puts 10% down he does have equity but cannot take it out of the house.
Posted on 9/13/12 at 3:05 pm to WikiTiger
quote:
The bank will consider the true value to be what you paid for it, not the appraisal, and that's what the PMI calculation will be based on.
Can't you get an appraisal after purchasing the home and send it to the bank as a way to prove that the LTV is 80% or less?
I literally just got off the phone with the company doing our refi and I have a question sort of related to this thread.
Based on the appraisal, we are at 84% LTV. The options were:
1. second loan (which I don't want to do)
2. continue to pay PMI until LTV reaches 80%
3. Upfront PMI payment, where we pay ~$4500 either out of pocket or rolled into the loan (I would roll) and not have to worry about paying monthly PMI.
I am leaning towards 3. It would increase the monthly payment by ~$21, but would save us $150 on monthly PMI. Also, it protects against devaluation. It seems like the only downside is paying more than we would have to in the event the house appreciates to get us to 80% (although an obvious silver lining in that downside).
Am I on the right tracking in thinking rolling the cost of up front PMI into the loan is the way to go? Any downside I am missing?
Posted on 9/13/12 at 4:07 pm to GRTiger
I roll the upfront MI charge in on allmost all conventional refi's i do for customers. you are on the right track..
Posted on 9/13/12 at 4:11 pm to GRTiger
quote:
Can't you get an appraisal after purchasing the home and send it to the bank as a way to prove that the LTV is 80% or less?
Yes, but isn't there a waiting period of a year or two before they allow that? Hopefully someone else will be able to confirm that.
In other words, you can't close the loan on day 1, have a new appraisal done on day 2 that is higher than the amount you paid on day 1, and then apply for removal of PMI. You have to wait a certain amount of time.
Someone please correct me if I'm wrong.
This post was edited on 9/13/12 at 4:12 pm
Posted on 9/13/12 at 4:17 pm to WikiTiger
you are correct Wiki most MI comanys have a 2yr mim you have to pay the monthly MI
Posted on 9/13/12 at 4:26 pm to hawkeye007
quote:
I roll the upfront MI charge in on allmost all conventional refi's i do for customers. you are on the right track..
Good to know. Thanks.
Posted on 9/13/12 at 4:26 pm to WikiTiger
(no message)
This post was edited on 11/29/12 at 3:26 pm
Posted on 9/13/12 at 4:36 pm to KG6
no your property tax should be based on what you paid for the house. if the tax value is 205 and its foreclosed then sold the new tax value is what you paid for it.
Posted on 9/13/12 at 4:43 pm to hawkeye007
(no message)
This post was edited on 11/29/12 at 3:26 pm
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