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KPtoys
I'm getting old
Member since 5/05 8688 total posts
Name:
Karen
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PMI question
I hope someone can answer this for me
I will use round number since they are SO much easier to work with.
Now - hypothetical
If a house is worth $500k
The seller is asking $425k
We put up the additional $25k to get the mortgage down to 80% of what the home value is worth do we still have to pay PMI? Does it matter that the seller already dropped the price down so much that it is almost down to 80% of the value? Anyone?
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Posted 8/29/08 10:26 AM  |
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Prudential Douglas Elliman Real Estate
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Jenn627
Laaaaaaaambert!
Member since 5/08 9818 total posts
Name:
Jenn
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Re: PMI question
What we were told (don't know if it's true or not) - was that we had to pay PMI because our house was in a declining market area - had nothing to do with what we put down (20%).
Again - I don't know if that's true or not - we were livid with the bank - and that's the story we got.
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| Posted 8/29/08 11:21 AM |
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GoldenRod
10 years on LIF!
Member since 11/06 26792 total posts
Name:
Shawn
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Re: PMI question
I always heard that if you borrow more than 80% of the VALUE of the house, you might need to pay PMI (depending on the bank). I'm pretty sure it's based on the appraised value, not what you paid for it.
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| Posted 8/29/08 11:25 AM |
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KPtoys
I'm getting old
Member since 5/05 8688 total posts
Name:
Karen
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Re: PMI question
Posted by GoldenRod
I always heard that if you borrow more than 80% of the VALUE of the house, you might need to pay PMI (depending on the bank). I'm pretty sure it's based on the appraised value, not what you paid for it.
ok, that is good I hope that is the case ty!
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| Posted 8/29/08 11:32 AM |
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KPtoys
I'm getting old
Member since 5/05 8688 total posts
Name:
Karen
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Re: PMI question
Posted by Jenn627
What we were told (don't know if it's true or not) - was that we had to pay PMI because our house was in a declining market area - had nothing to do with what we put down (20%).
Again - I don't know if that's true or not - we were livid with the bank - and that's the story we got.
Ew. I hope not!! Isn't almost 90% of the country a "declining market" right now?
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| Posted 8/29/08 11:32 AM |
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JandJ1224
Member since 6/06 5911 total posts
Name:
Jannette
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Re: PMI question
I wonder where the value of $500K is coming from?
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| Posted 8/29/08 12:32 PM |
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Aries14
Can't plan life...
Member since 8/08 2860 total posts
Name:
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Re: PMI question
hmmm, not an expert by any means, but I think I remember our bank saying it was 20% of the mortgage???
Message edited 8/29/2008 1:15:56 PM.
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| Posted 8/29/08 1:06 PM |
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cindy104
This is my "Baby"
Member since 6/08 1522 total posts
Name:
Cindy
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Re: PMI question
I don't think it matters what the house is worth; if you're putting anything less then 20% down of what you're borrowing, you will have to pay PMI.
I'm pretty sure there's no way around it.
Message edited 8/29/2008 1:09:23 PM.
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| Posted 8/29/08 1:07 PM |
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GoldenRod
10 years on LIF!
Member since 11/06 26792 total posts
Name:
Shawn
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Re: PMI question
From Wikipedia:
http://en.wikipedia.org/wiki/Private_Mortgage_Insurance
Mortgage insurance in the US
The annual cost of PMI varies and is expressed in terms of the total loan value in most cases, depending on the loan term, loan type, proportion of the total home value that is financed, the coverage amount, and the frequency of premium payments (monthly, annual, or single). The PMI may be payable up front, or it may be capitalized onto the loan in the case of single premium product. This type of insurance is usually only required if the downpayment is less than 20% of the sales price or appraised value (in other words, if the loan-to-value ratio (LTV) is 80% or more). Once the principal is reduced to 80% of value, the PMI is often no longer required. This can occur via the principal being paid down, via home value appreciation, or both. In the case of lender-paid MI, the term of the policy can vary based upon the type of coverage provide (either primary insurance, or some sort of pool insurance policy). Borrowers typically have no knowledge of any lender-paid MI, in fact most "No MI Required" loans actually have lender-paid MI, which is funded through a higher interest rate that the borrower pays.
Sometimes lenders will require that LMI be paid for a fixed period (for example, 2 or 3 years), even if the principal reaches 80% sooner than that. Legally, there is no obligation to allow the cancellation of MI until the loan has amortized to a 78% LTV ratio (based on the original purchase price). The cancellation request must come from the Servicer of the mortgage to the PMI company who issued the insurance. Often the Servicer will require a new appraisal to determine the LTV. The cost of mortgage insurance varies considerably based on several factors which include: loan amount, LTV, occupancy (primary, second home, investment property), documentation provided at loan origination, and most of all, credit score.
If a borrower has less than the 20% downpayment needed to avoid a mortgage insurance requirement, they might be able to make use of a second mortgage (sometimes referred to as a "piggy-back loan") to make up the difference.[4] Two popular versions of this lending technique are the so-called 80/10/10 and 80/15/5 arrangements. Both involve obtaining a primary mortgage for 80% LTV. An 80/10/10 program uses a 10% LTV second mortgage with a 10% downpayment, and an 80/15/5 program uses a 15% LTV second mortgage with a 5% downpayment. Other combinations of second mortgage and downpayment amounts might also be available. One advantage of using these arrangements is that under United States tax law, mortgage interest payments may be deductible on the borrower's income taxes, whereas mortgage insurance premiums were not until 2007. In some situations, the all-in cost of borrowing may be cheaper using a piggy-back than by going with a single loan that includes borrower-paid or lender-paid MI.
Based on this, it's relative to the Loan to Value ratio. The Value is the appraised value of the house. The Loan is how much you are borrowing. If the bank agrees that the house is worth $500k, then if you borrow $400k or less, your LTV is less than 80% and won't need PMI.
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| Posted 8/29/08 1:29 PM |
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KPtoys
I'm getting old
Member since 5/05 8688 total posts
Name:
Karen
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Re: PMI question
Posted by JandJ1224
I wonder where the value of $500K is coming from?
sellers real estate appraisal. Of course just a hypothetical round number
Message edited 8/29/2008 1:53:46 PM.
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| Posted 8/29/08 1:51 PM |
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Arieschick29
aries+cancer= pisces&gemini
Member since 3/06 4268 total posts
Name:
Jen
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Re: PMI question
my friend who is house hunting now was told that no matter what you put doen, you have to pay PMI because of all the troubles in the market right now.
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| Posted 8/29/08 3:12 PM |
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JandJ1224
Member since 6/06 5911 total posts
Name:
Jannette
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Re: PMI question
Posted by KPtoys
Posted by JandJ1224
I wonder where the value of $500K is coming from?
sellers real estate appraisal. Of course just a hypothetical round number
Oh ok. Appraisals are relative to when they were done. It seems a little off that if a house was really worth 500 someone would sell for 425.
Not sure about the PMI question though, banks would probably go by sales price as value and as such it would have to be 20% of sales price.
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| Posted 8/29/08 3:26 PM |
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KPtoys
I'm getting old
Member since 5/05 8688 total posts
Name:
Karen
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Re: PMI question
Posted by JandJ1224
Posted by KPtoys
Posted by JandJ1224
I wonder where the value of $500K is coming from?
sellers real estate appraisal. Of course just a hypothetical round number
Oh ok. Appraisals are relative to when they were done. It seems a little off that if a house was really worth 500 someone would sell for 425.
Not sure about the PMI question though, banks would probably go by sales price as value and as such it would have to be 20% of sales price.
It is a family sale. That is why the house may be sold for below market value. And again, they are ficticious numbers
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| Posted 8/29/08 3:30 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: PMI question
Posted by KPtoys
I hope someone can answer this for me
I will use round number since they are SO much easier to work with.
Now - hypothetical
If a house is worth $500k
The seller is asking $425k
We put up the additional $25k to get the mortgage down to 80% of what the home value is worth do we still have to pay PMI? Does it matter that the seller already dropped the price down so much that it is almost down to 80% of the value? Anyone?
Who said the house is worth 500k?
Unless this number came from YOUR bank... it really doesn't mean much.
Message edited 8/29/2008 4:12:29 PM.
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| Posted 8/29/08 4:11 PM |
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KPtoys
I'm getting old
Member since 5/05 8688 total posts
Name:
Karen
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Re: PMI question
Posted by ave1024
Posted by KPtoys
I hope someone can answer this for me
I will use round number since they are SO much easier to work with.
Now - hypothetical
If a house is worth $500k
The seller is asking $425k
We put up the additional $25k to get the mortgage down to 80% of what the home value is worth do we still have to pay PMI? Does it matter that the seller already dropped the price down so much that it is almost down to 80% of the value? Anyone?
Who said the house is worth 500k?
Unless this number came from YOUR bank... it really doesn't mean much.
No one. LOL. It is a number pulled out of thin air. I am basically asking if the home was purchased for 80% of the value meaning the seller agreed to 20% under the value of the home if that would mean having to pay PMI or not.
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| Posted 8/29/08 4:20 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: PMI question
Posted by KPtoys
No one. LOL. It is a number pulled out of thin air. I am basically asking if the home was purchased for 80% of the value meaning the seller agreed to 20% under the value of the home if that would mean having to pay PMI or not.
The only thing that matters in regards to PMI is your Loan to VALUE numbers.
The bank determines value by using an appraiser that they hire.
The bank's appraiser really has no incentive to come back with such an inflated appraisal.
So if you buy the house for 425k, I wouldn't expect an appraisal to be anything more. Maybe you will get a 450k number if the sun and the moon align. But expecting 500k is a pipe dream.
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| Posted 8/29/08 4:23 PM |
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ave1024
I Took The Wrong Road
Member since 12/07 6153 total posts
Name:
That Led To The Wrong Tendencies
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Re: PMI question
And also a bank is not stupid. If they see you are only putting 5-10% down, that's another reason for them not to inflate the purchase price. 
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| Posted 8/29/08 4:24 PM |
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