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Do I need 20% down if the value of my home is more than I am paying?

I am looking to purchase a short sale home that is valued much higher than the purchase price.  Do I still need 20% down on the loan to avoid mortgage insurance or is it based on assessed value vs. loan value?
  • March 01 2009 - Vancouver
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Answers (7)

Profile picture for workabee
Did one of your drug tenants give you that hat or was it an award from the buyers of the undead for digging up their zombie posts?
  • April 18 2010
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Profile picture for Blue Nile
With that kind of deceptive self promotion, he will probably be censored and ridiculed before he even has any recommendations.
  • April 17 2010
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That-a-boy James. Way to offer your expert advice and counsel on a 1+ year old post! 

Bravo! 
  • April 17 2010
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Yes you will need 20% unless you or your spouse is / was a veteran. But you can buy for as low as 3.5% of the purchase price if you want to save your out of pocket money. If you consider the next best opportunity cost you just might accept the MI and use the rest of your money for other purposes. Now if you decide to use say FHA and if you structure the offer right the seller may give you points back (each point is 1% of the agreed price) within the transaction so you can get a cheaper loan. Because I am a real estate agent and a loan office when I structure an offer for a home I will ask the seller for these points back. In this market I often get 6% back. With short sales you can be very creative with your offer. Actually with any offer, in this market, you can get quite creative and save yourself thousands and sometimes tens of thousands of dollars. i often get my client an interest rate buy down included in the deal.  I have 19+ years in the business. I just joined Zillow last week so I haven't had time to build up my recommendations yet. But I'll have then very soon. I also help run IC Clean People Recovery Housing in Everett WA. We are a 501C3 housing 110+/- recovering drug addicts and alcoholics. I use much of any fees I get to help run our 8 homes. Call me or email if I can be of assistance.
  • April 17 2010
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Lenders go by the lessor value. So if your purchase is lower than your appraised value, your loan amount would be base on purchase price. If your appraised value is lower than your purchase price, then your loan amount will be based on the appraised value.
Remember appraisers are being more conservative than ever so your appraised value may come in close to your purchase price.
  • March 31 2010
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It's based on the lesser of the selling price or the appraised value. 

Example: If it appraises for $250,000 and you buy it for $200,000, you have to put down $40,000 to avoid mortgage insurance.
  • March 01 2009
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You will need 20% of the lesser of the sales price or appraised value. 

  • March 01 2009
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