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Old 12-03-2013, 08:07 PM
 
57 posts, read 133,852 times
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There are some great deals on HUD homes in my area with a few properties $30-40,000 under value. The issue is they have very minor issues that would make them ineligible for USDA loan. I am looking at getting an FHA loan (do not have enough cash for conventional) but hate the MI adding $200/month.

IF a house was purchased at $160,000 and then appraised at $200,000 would it be eligible to refinance without MI? Am I totally misunderstanding MI requirements? Any major flaws in logic? Is something like this possible?
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Old 12-03-2013, 08:26 PM
 
Location: MID ATLANTIC
7,606 posts, read 17,664,631 times
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Yes, but you would need 6 months seasoning with most institutions. Be aware, by closing 40K under value, you just became you own worst comp. Meaning - you close @ 40K less than market. House across the street goes up for sale, they now have to consider your PURCHASE as the top comp (assuming homes are not drastically different). Depending on area activity after you close, it may or may not work the way you plan.
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Old 12-03-2013, 10:51 PM
 
Location: Boca Raton, FL
4,856 posts, read 8,333,691 times
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Smile Delayed financing

Some lenders have delayed financing.

Example: I have a client who bought cash in September 2013. She is now looking for cash out and is eligible. In her case, the condo she bought as a short sale would only honor cash deals.

Closing in January 2014. Already approved.
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Old 12-03-2013, 11:17 PM
 
57 posts, read 133,852 times
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Quote:
Originally Posted by SmartMoney View Post
Yes, but you would need 6 months seasoning with most institutions. Be aware, by closing 40K under value, you just became you own worst comp. Meaning - you close @ 40K less than market. House across the street goes up for sale, they now have to consider your PURCHASE as the top comp (assuming homes are not drastically different). Depending on area activity after you close, it may or may not work the way you plan.
The neighborhood is pretty similar as far as comps. There were two houses sold in the past year at $190k and $189k. There are two for sale currently, a homepath home at $194k and the HUD at $162k. Current tax appraisals are the low 200s. How would you see the selling of the HUD home effect the rest of the neighborhood of ~40 homes?
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Old 12-04-2013, 04:33 AM
 
Location: Southern California
4,350 posts, read 4,946,133 times
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Quote:
Originally Posted by Bette View Post
Some lenders have delayed financing.

Example: I have a client who bought cash in September 2013. She is now looking for cash out and is eligible. In her case, the condo she bought as a short sale would only honor cash deals.

Closing in January 2014. Already approved.
To tie this into the OPs question, do you know if the new lender used the same value as the purchase price?

Quote:
Originally Posted by jdougal View Post
The neighborhood is pretty similar as far as comps. There were two houses sold in the past year at $190k and $189k. There are two for sale currently, a homepath home at $194k and the HUD at $162k. Current tax appraisals are the low 200s. How would you see the selling of the HUD home effect the rest of the neighborhood of ~40 homes?
Understand , this is a what if question. Forget the fact of who is selling, it is a home that sold for $160,000. It means that no one else wanted to pay $192k for this particular home or even $161k for this home. The market demand for this home is now $160k. The appraisal is based on passed sales and will always be lagging. It will be very hard for a future appraisal to say that your house appreciated $40,000 in 6 months if there are no other sales and you haven't made any improvements to the house. Instead the home purchased at $160,000 is more on indicator that the market is declining.

Are there really on 2 other homes that sold in the last year? You can selectively use comps when making and justifying your offer to seller, but a appraiser looks at all comps and makes adjustments to previous sales. So if a home sold for $200,000 then the next one sold for $160,000 indicated a drop in demand. The appraiser doesn't consider things like interest rates or the economy of why the next house went for 160, but they do look at home condition, type of sale, and other factors that an appraiser might want to chime in on.

You logic is not totally flawed, but it takes more time for a lender to consider that you got your house at a deal rather than it has gone up in value due to market condition. So when the house sales for $160, the house will be used for future appraisal and be seen at the house that brought down the value of the neighborhood. After the sale of the $160 house , it will make the $194k homepath sale a tougher sell. The future buyer of the 194k home might thank you in the future because you gave them negotiation ability to offer lower than the 194k originally ask for.

Isn't the cost of $2400 a year for a house that you think is $40,000 under value a good investment? Don't get hung up on the idea that it is called mortgage insurance. Mortgage insurance is just like interest , it is just the cost to borrow money.

One more thing , if you honestly think that the house is $40,000 more, couldn't you just sell it and have more cash for a larger down payment and do a conventional loan? Sure you'll probably pay agent fees, taxes , etc , but if you could still walk away with $20,000 in 6 months, that is like tripling your money used as your original down payment.

Last edited by thelopez2; 12-04-2013 at 04:49 AM..
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Old 12-04-2013, 05:30 PM
 
Location: MID ATLANTIC
7,606 posts, read 17,664,631 times
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People that read here are usually making major financial decisions, such as hoping to pay PMI for a short period of time. You (the OP) wanted flaws in your thinking. Your new neighbors will all be groaning, because your purchase (most likely) will bring down the values of their homes. That said, if the neighborhood ignores your purchase and keeps clipping along at 189K/190K, then your logic is fine. Hopefully, the higher priced homes are resales. My point is, once you close, it's going to be hard to bolster sales significantly higher unless the state of repair in your home is bad (and you bring it up to the level of others).

The assessed values for taxes have zero relation to current market value. It can help you determine trends. If you tell me your assessments in your neighborhood are over 200K, one would conclude declining values.
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Old 12-05-2013, 02:13 PM
 
57 posts, read 133,852 times
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One thing that was important that I did not include was the condition of the home. The Homepath home for $194k is dated but overall in move in condition. The appliances need upgrading but they are perfectly serviceable. The carpet has been replaced throughout and unit painted. The HUD home has a repair escrow of $900 for drywall. It also from the photos needs new carpet throughout and paint. HUD has the home listed at $162k with a as-is value of $180k. My thought is that for $4-5,000 the home would be in similar condition to the rest of the neighborhood.
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Old 12-05-2013, 02:27 PM
 
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I thought that the FHA mortgage insurance was now 5 years minimum regardless of the loan to value ratio?

Edit: Looks like you would plan on refinancing not just trying to get the MI removed.
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Old 12-05-2013, 05:40 PM
 
Location: Southern California
4,350 posts, read 4,946,133 times
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Quote:
Originally Posted by jdougal View Post
One thing that was important that I did not include was the condition of the home. The Homepath home for $194k is dated but overall in move in condition. The appliances need upgrading but they are perfectly serviceable. The carpet has been replaced throughout and unit painted. The HUD home has a repair escrow of $900 for drywall. It also from the photos needs new carpet throughout and paint. HUD has the home listed at $162k with a as-is value of $180k. My thought is that for $4-5,000 the home would be in similar condition to the rest of the neighborhood.
Take before and after pictures, but these are these are the improvement that were mentioned earlier. It will explain why you got the house at a lower price.
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Old 12-06-2013, 09:01 PM
 
Location: Plano, TX
75 posts, read 218,533 times
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Quote:
Originally Posted by msdmoney View Post
I thought that the FHA mortgage insurance was now 5 years minimum regardless of the loan to value ratio?

Edit: Looks like you would plan on refinancing not just trying to get the MI removed.
on 30yr fixed loans, the mi is now for the life of the loan.
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