I negotiate and buy a house, which is less than the fair market value of the house. Now, if I take a loan of 80% of the negotiated value, which would be 90% of the Fair Market Value, do I still pay a PMI.
2007-03-21 06:57:15 · 6 answers · asked by rjain15 2 in Business & Finance ➔ Renting & Real Estate
I think PMI is based on the sale price.
2007-03-21 06:59:39 · answer #1 · answered by a heart so big 6 · 0⤊ 0⤋
When taking out a loan the lender will use the value or the agreed price, what ever is lower.
This means that the appraised value is largely not the value the lender will use when making the loan if the agreed price is less.
PMI is based on the LTV (Loan To Value) where the value is set to the purchase price if the appraisal shows a higher value.
Ask the lender about PMI and what you can do later if the value rises. If you are paying a monthly charge for PMI you can have that terminated after a period and after showing the value has risen. Note I am not sure if anything can be done about an upfront payment for PMI. Maybe a rebate is possible or maybe it is not.
2007-03-21 07:09:10 · answer #2 · answered by Anonymous · 0⤊ 0⤋
If you do not put 20% (of the purchase price) down on the house, then you pay PMI. It is not based on the market - or appraised -- value of the house.
Depending on the type of loan you have, your PMI may be canceled after you have 20% equity built into the home. (which should be no problem for you if you are purchasing the home for less than the appraised value anyway...that's what it is called instant equity). Other loans say that you cannot cancel PMI until 78$ of the home is paid off and still other loans require you to pay the PMI for the life of the loan. Make sure you know which kind you have.
Good luck!
2007-03-21 07:37:22 · answer #3 · answered by YSIC 7 · 0⤊ 0⤋
On purchase transactions, the lower of the purchase price and the appraised value is what lenders base your LTV on, but your question doesn't make sense. According to what you're saying, the negotiated price is actually higher than the appriased value. Is that correct? And if so, why the heck are you buying a house for more than its appraised value? Usually, purchase agreements have a clause in them that makes the purchase price the same as the appriased value when this sort of thing happens. If you just got your wires crossed, and the purch price is less than the appraised value, then yes, you'd have to pay PMI.
2007-03-21 07:04:30 · answer #4 · answered by togashiyokuni2001 6 · 0⤊ 0⤋
yea have to pay pmi if you get a mortgage that is 80% or more of the home.
2007-03-21 07:03:00 · answer #5 · answered by cmruffin1 2 · 0⤊ 0⤋
don't understand yet ill say that possibly a $ six hundred.000.00 residing house is amazingly achieveable yet only make the effort on doing alot of analysis sources values in California are replacing now this days
2016-12-02 08:52:16 · answer #6 · answered by turnbough 3 · 0⤊ 0⤋