Im buying a house for 170k, that is appraised at 240k and my lender is now saying that i need PMI insurance or 40k down because without 40k down im above 80% LTV.
This dosent make sense because im purchasing a home with existing equity, even with a 20k down payment im at 62%LTV because of what the home is appraised for.
Can someone please explain this to me.
2007-11-28 04:29:48 · 6 answers · asked by kenfroewiss 1 in Business & Finance ➔ Renting & Real Estate
As far as I know, the calculations are done using the purchase price, not the appraisal price. (It's possible that it's the lower of the two.) To avoid PMI (which I'd always want to avoid if I could), it would seem like 20% of the $170k purchase price (i.e. $34k) would be enough, so I'm not sure what the other $6k is for. There are some additional fees that the buyer has to pay, but I wouldn't think they should be that much. Are there "points" on the loan? I guess that could be enough to do it, especially if it's something like 2 points.
2007-11-28 04:43:43 · answer #1 · answered by Dave W 6 · 0⤊ 0⤋
Appraised value is not the determining factor as to if you will be charged PMI or not.
This little gem is based on the sales price of the house, so they are justified in charging this PMI.
Now some say this PMI should be for at least 2 years, but if you are able to prove with an appraisal after the loan closes then you might be able to eliminate PMI.
Congress has passed a law that allows certain individuals in certain income brackets to deduct PMI on their federal income tax.
You should check with your tax consultant and see if you are qualified for this deduction.
Some lenders might give you a hard time about eliminating PMI, you have to be persistent.
If you get a person that says no, by all means ask to speak to a supervisor. Make sure you have an indpendent appraisal to back up your claim. In some instances the lender might reguire you to use a certain appraisal on their approved list, so before you go and spend money on an appraisal, make sure he/she is acceptable to the lender.
If you are sure you have exceeded and dropped below the 80% loan to value and you lender still refuse to eliminate the PMI you might take them to small claims court.
In most cases the lender will not show up so you win by default. You have to make sure the lender is served, that is your responsibility.
I hope this has been of some use to you, good luck.
''FIGHT ON"
2007-11-28 08:46:28 · answer #2 · answered by loanmasterone 7 · 0⤊ 0⤋
Its true that if you LTV is higher than 80% PMI is required, but your lender is not looking at the appraised value of the house to calculate this, they are looking at the loan amount. Based on your downpayment of $20K and the loan amount of $170K your LTV is 88%. Whereas a DP of $40K will make it 76%.
2007-11-28 04:57:04 · answer #3 · answered by M M 1 · 0⤊ 0⤋
Most banks are now going off PURCHASE price and not appraisels because they are NOT stupid and know that in alot of areas the prices are falling and they do not want to be giving out loans that will soon be underwater like so many are now.
You have 3 choices.
1. Pay the PMI.
2.Increase your downpayment.
3. Shop around for a lender who will base it on appraised value.
2007-11-28 05:04:09 · answer #4 · answered by Jerrold J 3 · 0⤊ 0⤋
The home is only worth what someone will pay for it, it might of been appraised at 240K at one time but in todays market it is not worth that, it is worth 170K that is what the bank sees, that is what the market sees, that is what the highest bidder has gotten it for. Home is now appraised for 170K
2007-11-28 10:43:53 · answer #5 · answered by Pengy 7 · 0⤊ 0⤋
Investor guidelines require the lender base their loan calculations of the appraised value or sales price, whichever is lower. This is an industry standard.
2007-11-28 05:10:48 · answer #6 · answered by Anonymous · 0⤊ 0⤋