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How can i avoid the PMI payments?

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February 13 2010 - Easton
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Profile picture for Go Huskers
"The PMI requirement is based on the appraised value of the home, which doesn't always mean the sale price. If you are able to get a home for under the appraised value and get instant equity, you will be able to put a lower down payment while still avoiding the PMI requirement. "
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WRONG!

If the house appraises for more than the sale price then the sale price is used in determining the loan to value (LTV). There is no such thing as instant equity!

Example:
Contract price $200,000
Appraised Value $220,000
Loan amount $176,000
The LTV is 88% not 80% and requires mortgage insurance in some form. LTV is calculated based on the lesser of the appraised value or contract price.

More incorrect and bad advice!
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December 12 2012
The PMI requirement is based on the appraised value of the home, which doesn't always mean the sale price. If you are able to get a home for under the appraised value and get instant equity, you will be able to put a lower down payment while still avoiding the PMI requirement. 

If you can't get instant equity, you can request to cancel PMI once you have at least 20% of the appraised value of your home as equity. If you are fortunate enough to have your home's value appreciate after purchase, you can reach that 20% faster even though you are still making the same mortgage payments.

A knowledgeable and experienced lender is your greatest resource for answering this question. I see this original question was asked in 2010, but if any other readers with the same question would like the contact information of a great lender that can help with questions such as this, let me know and I'll forward that information over!

Happy holidays! 
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December 12 2012
The term Diamond In The Rough comes to mind on the case I speak of...

Believe it or not, while in contract the HOA send a letter that certian things such as the lawn needed to be reseeded, lights fixed, and a few other more minor things needed attention, DAYS before close, and they went ahead and completed all the requested work with no cost to my buyers. 

Maybe you would like me to find you a place out here Tangent, 359 sunny days a year!!!!
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December 12 2012
Karl you are correct and I did make an assumption that was too general.

What I take issue with is the way Fannie Mae instructs their listing agents realtor's to price their homepath properties. They ignore sold comps and they ignore listed comps.  They simply list the price at some totally inflated value with the hope that some buyer will come along and just buy it take a homepath mortgage and never get the property appraised or ignore the appraisal all together. This could be in just my market but I have seen plenty of posts from people in other markets describing the same issue with homepth pricing.
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December 12 2012
Profile picture for Tangent110
I don't know what the market is like where you are, but I've put in bids on 14 houses now, and nine of those bids were over asking price, some significantly so. We were outbid on every one of them (I have excellent credit and I am pre-qualified). 

I can get a 30 yr homepath mortage at 3.85%. The house I'm looking at is a homepath approved house, but I didn't know that until after I had decided to put a bid on it. I was assuming that it was possible for other people to be attracted to a house on its own merits like I was. 
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December 12 2012
Michael, I like your answers, but I do caution.  I have put a client into a Homepath home that was under market value.  I yesterday actually gave my clients an updated CMA, and they have already seen a $60,000 increase on the property that they closed on 5 months ago, some of that is that they got a great deal on a great home, some of it is our market has gone up about 7% in the past few months.  I only say this because as we all know (using your McDonalds reference) that McD's doesn't charge the same for a cheese burger in every store.  Things in different markets can be different.  I do agree with you though.  Playing devils advocate here...
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December 12 2012

After looking at your post history this whole conversation is folly.

You already posted that you know you are overpaying for a Homepath property. Then you asked a bunch of realtors if this makes sense. Big shocker the answer you get.

Ask an accountant or a financial planner or an attorney and get the real answer. You asking a realtor if you should pay more than the appraised value is pointless. This is like me asking Mcdonalds if its ok for me to eat unhealthy food.

The worst part about a homepath mortgage is you do not even have to get an appraisal so you have no idea what your overpaying.

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December 12 2012
No the entire issue lies in the fact that people will "like a homepath" house because they like the idea of a mortgage at 97% with no pmi. They will ignore the fact that the home is priced way above market and will proceed with the deal with no appraisal and thus pay more for the home. Sure if the person falls in love with the property then it pays to avoid PMI. However realtors are showing home path properties and home buyers are falling in love with a 3% loan with no PMI.

Additionally Homepath rates are closer to 4-4.125% and a buy down is still required. A typical homepath purchase even with excellent credit will have 3pt+ of add ons direct from Fannie Mae.

Long term  MIP or PMI will fall off and the borrower will be stuck paying 1 percent higher than they could have qualified for originally. Although it may be tough for this to happen when Fannie is selling their home path properties way above market.
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December 12 2012
Profile picture for Tangent110
If you do the math between a conventional loan and a homepath, I think you will find the homepath is actually cheaper per month. If the house you want is a homepath qualified house, and if it is the case as Michael states that homepath homes are priced  "way above market", then it doesn't really matter what financing option you take, since you will be paying more either way. 

A $200,000 mortgage @
3.2% conventional w/ PMI = 1264 month
3.85% homepath no PMI=1176 month
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December 11 2012
"I don't find these answers particular helpful or insightful."

Talk about throwing stones....

First the rates on Homepath are much much higher than a conventional loan or an fha loan, va loan, usda loan. The add ons for homepath are huge.

Second Fannie Mae prices their homepath properties way above market. This could be specific to my region but I doubt it. Any homepath listing I see is typically infalted 10-20% above comparables. Fannie Mae is not doing anyone any favors.
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December 11 2012
Profile picture for Tangent110
I don't find these answers particular helpful or insightful.

How about this answer....by a Homepath home. It's a Fannie Mae program that doesn't require PMI or an appraisal, so you don't have to cover the difference between offer and appraised value yourself. 
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December 11 2012
If you put 20% down, then PMI is not required on a conventional loan. I think all FHA loans require some form of PMI, but they have slightly lower rates than conventional typically. Best bet, is to ask a lender. They can fill you in with a more detailed answer. 
Good Luck!
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December 11 2012

If it is a purchase, most of the eastern shore, I.E. Easton is eligible for USDA housing benefits and they allow 102% financing with no mortgage insurance.  Rates typically run about 1/8 higher then conventional loans.  USDA approved lender so let me know if you have any specific questions.

Let me know if this helps.

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March 02 2010
Good point. I was looking for MIP, or mortgage insurance payments, but could not find that either.  
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February 13 2010
Actually Clay I was making a wise crack...I hve never heard of Premium Mortgage insurnce..even single or split premium is stil Ptivate Mortgage Insurance.
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February 13 2010
Good answer AA but my point was Single or Split Premium MI is not abreviated with PMI. 
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February 13 2010
Premium Mortgage Insurance is better than Private...but costs more....

The easy andswer is you avoid PMI by putting 20% down.  If that is not an option you don't have a ton of alternatives...


Possible VA loan, USDA or possible an 80-10-10...other than that I don't know of any No MI loans.
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February 13 2010
That would be Private Mortgage Insurance. 
Satcomer, are you planning on buying or refinancing?
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February 13 2010
I understand you can avoid PMI ( Premium Mortgage Insurance.) by having a 20% down payment.I know many people don't have that much working capital, I suppose that was why the 80 / 20 loans were so popular for awhile.
Why not contact a lender and find out what they can do for you with today's market conditions?
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February 13 2010
 
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