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Old 04-07-2015, 04:51 PM
 
Location: Funkotron, MA
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Let's say your friend is willing to sell her $300k house to you for $150k. You have $7.5k for a 5% down payment, so you qualify for an FHA loan.

Could you immediately refinance, using the instant $150k in equity and get rid of the PMI?

I assume there's no argument you can make when you first apply for the loan that takes into account that $150k equity forgoing the PMI in the first place, right?
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Old 04-07-2015, 05:49 PM
 
Location: Southern California
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You can not do it as you described.
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Old 04-07-2015, 06:30 PM
 
Location: Funkotron, MA
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Care to elaborate?

How do you handle a situation like this (taking out a loan to buy a house for 1/2 the value)?
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Old 04-07-2015, 09:02 PM
 
Location: Southern California
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In the near term, the next lender will treat the lower of the sale or appraised value as the value in the LTV calculation.
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Old 04-08-2015, 08:39 AM
 
Location: South Texas
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These are two different transactions, a purchase then a refinance. Fannie Mae has flipping rules that come into play. If you are dealing with a local lender, their internal lending policies also will come into play. Be prepared for a bit of a delay between the initial purchase and the refi.

As for the PMI removal, I'll back out of that and let one of our resident mortgage experts to talk to those issues.
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Old 04-08-2015, 09:45 AM
 
4,543 posts, read 11,547,065 times
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Quote:
Originally Posted by raveabouttoast View Post
Let's say your friend is willing to sell her $300k house to you for $150k. You have $7.5k for a 5% down payment, so you qualify for an FHA loan.

Could you immediately refinance, using the instant $150k in equity and get rid of the PMI?

I assume there's no argument you can make when you first apply for the loan that takes into account that $150k equity forgoing the PMI in the first place, right?
Most likely would have to wait 6 months before you can use the actual value as the value for the new loan.
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Old 04-09-2015, 07:07 PM
 
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I'm in the same boat as you and can refinance now to get rid of our PMI on our fha loan as we bought way below appraised value and sales are up in our area. But the catch for us is that we have to wait 12 months according to our loan officer. Seasoned is what they called it I think. So at the 12 month mark, I'm most definitely refinancing our loan.
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Old 04-09-2015, 07:12 PM
 
Location: Sinking in the Great Salt Lake
12,901 posts, read 18,450,622 times
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All FHA loans require PMI for the duration of the loan now.

Appraisals also tend to not go much over the purchase price either... not sure how that would work on an obviously undervalued purchase though... 1/2 off sales aren't very common in the real estate market, I'd assume.
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Old 04-10-2015, 06:00 AM
 
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Maybe it would work if you have them sell it for $170K but include a $20,000 Seller Credit.

I learned late in the process that the seller credit on my purchase could have applied towards the downpayment. I just had it cover other closing costs instead, including some technically unnecessary ones (lender paid MI, buying down the interest rate), thinking it was a "use it or lose it" deal.
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Old 04-10-2015, 07:15 AM
 
Location: Southern California
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Quote:
Originally Posted by gsilver View Post
Maybe it would work if you have them sell it for $170K but include a $20,000 Seller Credit.

I learned late in the process that the seller credit on my purchase could have applied towards the downpayment. I just had it cover other closing costs instead, including some technically unnecessary ones (lender paid MI, buying down the interest rate), thinking it was a "use it or lose it" deal.
Is this on the loan you just closed? The lender said that the credit can be used as the downpayment? If so can you DM me their info?
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