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Old 09-21-2013, 06:56 AM
 
Location: MID ATLANTIC
7,598 posts, read 17,618,792 times
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When you close on your 260K home (with a 300K appraisal), you just became your own worst comp. Neighbors will blanch when finding out and it will be a tough, tough battle for the next comp to come in at 300K, because the appraiser cannot ignore the 260K transaction.

You have two ways to remove PMI: Borrower requested and automatic. The threshold of 80% is buyer requested and is based on the original sales price or appraisal, whichever is less. With a new appraisal, it's doubtful in today's appraisal environment that value will hold at 300K. The 78% is based on the original amortization schedule. The only way she's going to get a free ride out of her good deal is for values to hold for 2 years and her payments to be on time.

Here is the actual law, Homeowners Protection Act. Please pay particulare attention to footnote #4 on page 2. http://www.federalreserve.gov/boardd...al/cch/hpa.pdf

We could see a relapse on the horizon for the American economy; the stars are already aligning. Businesses are announcing layoffs, Obamacare has businesses cutting hours and staff, the Battle of the Budget is alive and well. The Fed Reserve has spent the last 30 days back-peddling on their initial announcement about the Fed stopping their purchase of US Bonds, and when that didn't work, Bernanke had to come out and outright say, "we don't think it's (the economy) fixed." What if today is the top of the market for the next 5 years? My point is, don't make plans based on things beyond your control, like an appraisal in the future.

Try to take a step back and ask your girlfriend to pick her priority: payment or cash, PMI is not in the equation until future values are known. It really is that simple. One of the two is more important than the other to your girlfriend. If the difference in payment can be made up by one additional exemption (and it usually can be), go with the least costly (in closing costs). In today's environment, it's next to impossible to get any cash out of the house once you put it in......and if it's needed down the road, more costly options exist (loans, credit cards), where it will be tougher to find cheaper money that today's mortgage (especially after tax considerations). If she has adequate/plentiful reserves, then payment is her priority. Points rarely makes sense when rates are this low.
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Old 09-26-2013, 06:58 AM
 
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Thanks SmartMoney.

To make sure I follow you; PMI will be paid until 80% of the loan remains. With the loan amount ($260,000) being less than what it will appraise for (assume $300,000) that means PMI would be paid until $208,000 is due.

Looking at the ammorization schedule, it will take approx. 10 years (120 payments) before PMI is removed. With PMI costing $121/mo x 12 x 10 = $14,520 total. That's a lot of money.

This 5% down + PMI at a rate of 4.625% was looking like the better choice until I see how much PMI we'd be paying.

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The other option, like I mentioned above is 3% down + No PMI @ 5.25%. We do have the option of buying points at 1.00% of the loan amount (3% down leaves $252,200 loaned). So 1pt would = $2522.

We could buy 2 points @ $5044 and have the rate drop to 4.75% (assuming .25% drop per point). Granted it's not as good as 4.625% but it's damn close and there won't be PMI.

The points breakeven mark will occur on the 65.5 month (so 5.5 years). We plan on being in the house at least 5 years so I see no issue with this at all.

---------------------------------------------------------

So now I guess the best option is to go with the 3% down + No PMI + 2pt which gives us a rate of 4.75%. Would you agree?

Thanks again for all of your help and insight. I think we're going to lock in today so hopefully the rate stays the same or drops a little more.
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Old 09-26-2013, 11:58 AM
 
2,779 posts, read 4,495,487 times
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To make sure I follow you; PMI will be paid until 80% of the loan remains. With the loan amount ($260,000) being less than what it will appraise for (assume $300,000) that means PMI would be paid until $208,000 is due.

Just a quick point. This isn't correct. You pay pmi until "the scheduled date of an 80-20 ratio" not the actual date. As I mentioned in my previous post we have significantly paid down our mortgage but have not yet reached the "scheduled date" so we still pay PMI.
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Old 09-26-2013, 01:19 PM
 
15 posts, read 25,820 times
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Quote:
Originally Posted by hml1976 View Post
To make sure I follow you; PMI will be paid until 80% of the loan remains. With the loan amount ($260,000) being less than what it will appraise for (assume $300,000) that means PMI would be paid until $208,000 is due.

Just a quick point. This isn't correct. You pay pmi until "the scheduled date of an 80-20 ratio" not the actual date. As I mentioned in my previous post we have significantly paid down our mortgage but have not yet reached the "scheduled date" so we still pay PMI.
So the scheduled date is based off the original loan amount, in our case $260,000. So the 80% mark would be $208,000. So it would not be removed until the scheduled date of hitting $208,000 owed: Correct?
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Old 09-26-2013, 06:21 PM
 
2,779 posts, read 4,495,487 times
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Quote:
Originally Posted by Hybrid AWD View Post
So the scheduled date is based off the original loan amount, in our case $260,000. So the 80% mark would be $208,000. So it would not be removed until the scheduled date of hitting $208,000 owed: Correct?
Right. But if you hit 208k a year earlier than scheduled you still have to pay PMI for a full year. One of the many reasons PMI sucks.
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Old 09-27-2013, 09:29 AM
 
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Quote:
Originally Posted by hml1976 View Post
Right. But if you hit 208k a year earlier than scheduled you still have to pay PMI for a full year. One of the many reasons PMI sucks.
So looking more into it and talking with a lender, this isn't 100% accurate.


You can indeed remove PMI if the value of your home has increased and an official appraisal is done on the home showing that the equity does satisfy the 80% LTV mark.

You have to take the steps to have this done as the lender will not address it without a proper appraisal. As far as they are concerned, the 80% LTV mark will be hit (like you said) on a given date.


Some PMI is required for at least 1 year if not 5 years. (Why there is two different lengths, I do not know)

So you might want to consider paying for an appraisal and contacting your lender at the same time. No sense in paying it and throwing money away when you don't need to.


One last note: This does not apply for the FHA loans that now require it for the life of the loan.
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Old 09-28-2013, 06:32 PM
 
2,779 posts, read 4,495,487 times
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Quote:
Originally Posted by Hybrid AWD View Post
So looking more into it and talking with a lender, this isn't 100% accurate.


You can indeed remove PMI if the value of your home has increased and an official appraisal is done on the home showing that the equity does satisfy the 80% LTV mark.

You have to take the steps to have this done as the lender will not address it without a proper appraisal. As far as they are concerned, the 80% LTV mark will be hit (like you said) on a given date.


Some PMI is required for at least 1 year if not 5 years. (Why there is two different lengths, I do not know)

So you might want to consider paying for an appraisal and contacting your lender at the same time. No sense in paying it and throwing money away when you don't need to.


One last note: This does not apply for the FHA loans that now require it for the life of the loan.
We've tried. It doesn't work, they go by their own "appraisal" system that is computerized and now they need proof that will we pay on time even though weve had a home loan with them for 6yrs so maybe next year they tell us. They will not accept an independent appraisal. I have yet to find a single person who has successfully had their PMI removed so take what they say and what the truth is with a grain of salt. We use USbank.
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Old 09-30-2013, 06:40 PM
 
Location: Southern California
4,350 posts, read 4,929,984 times
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Quote:
Originally Posted by hml1976 View Post
We've tried. It doesn't work, they go by their own "appraisal" system that is computerized and now they need proof that will we pay on time even though weve had a home loan with them for 6yrs so maybe next year they tell us. They will not accept an independent appraisal. I have yet to find a single person who has successfully had their PMI removed so take what they say and what the truth is with a grain of salt. We use USbank.
It would be hard to find someone in the last 10 years who has gotten PMI removed because of a couple of reasons, but I'd say interest rates played the biggest part. As rates dropped over the last 10 years, values went up, if you had PMI you had the choice to refinance into a lower rate and a new 30 year loan or change the term to a shorter than 30 year loan to stay on schedule. Then lending tightened up, values went down, prices dropped over the last few years. In some areas, prices have gone up 10% over last year in certain area. I expect people who bought 24 months ago with 10% down to be able to get out of their PMI this year.

I'm curious If you had your loan for 6 years and rates were at historic lows this year, why didn't you just refinance?
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Old 10-01-2013, 09:21 AM
 
2,779 posts, read 4,495,487 times
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Originally Posted by thelopez2 View Post
It would be hard to find someone in the last 10 years who has gotten PMI removed because of a couple of reasons, but I'd say interest rates played the biggest part. As rates dropped over the last 10 years, values went up, if you had PMI you had the choice to refinance into a lower rate and a new 30 year loan or change the term to a shorter than 30 year loan to stay on schedule. Then lending tightened up, values went down, prices dropped over the last few years. In some areas, prices have gone up 10% over last year in certain area. I expect people who bought 24 months ago with 10% down to be able to get out of their PMI this year.

I'm curious If you had your loan for 6 years and rates were at historic lows this year, why didn't you just refinance?
It's kind of a long story, we bought the house in 2007 for around 400k, we put down around 17% (I think). In 2011 it was worth about 300k and we refinanced with HARP 2 in Feb 2012 to cut our rate down and agreed to PMI at a value of 313k. The house is now worth about 420- 450k conservatively and seems to go up weekly, we owe 267k. I literally have had two real estate agents ring my doorbell to ask if we would please consider selling. We could refinance again but don't want the higher rates. USBank is refusing to remove PMI now because the loan isn't old enough (although we have used them for 6years so they know our payment history and have 800+ credit scores) although their first reason six months ago was that their computer assessment system said the house was still not at 75%.
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