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Will my MIP payments be lower if I purchase a home at well under its appraised value?

I'm considering the purchase of a bank-owned condo for about $60K and getting a 203(K) loan because it needs about $6K in cosmetic repairs. Once that's done, and based on the sale of other condos in the complex, it will be worth about $110K. Does that mean I'll get a break on the MIP, even if I make the minimum down payment of 3.5%?
  • August 12 2013 - US
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Answers (3)

Best Answer

The MIP is a straight up MULTIPLIER of the loan amount. Take your TOTAL loan amount and multiply it by .0135 and divide that by 12. Your MIP is based on loan amount, not value of the property :)
Also with FHA it will be on for the LIFE of the loan. So go 203K-and do the repairs. In a year, refinance conventional with an appraisal and your MIP should drop off.
  • August 12 2013
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A very good question. FHA does not remove mortgage insurance, but the 203k loan would allow for repairs. Most conventional lenders will allow you to use current market value after the repairs are complete AND after 6 months. Based on your value estimates, I recommend the repairs get done quickly and then look into refinancing after the 6 month period is up.

This will allow you to remove the mortgage insurance altogether.
  • August 12 2013
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The condo will have to be FHA approved to do a 203k loan.  Refinancing later conventional could also be an issue as condo would need to be "warrantable" and not all condo's are. 
  • August 12 2013
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