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Old 04-12-2015, 10:38 PM
 
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I recently bought a house from a family member for $148,000 with a conventional loan and put a 5% down payment; the property was appraised at $220,000. In my loan packet, I have to pay PMI since I didn't put down 20%, but after getting home, I did more research and came across the HUD PMI Act:
([url=http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respapmi]HUD PMI Act Information[/url])

From what read on there, the PMI should be cancelled automatically: "when the homeowner's equity position reaches 22 percent of the original value of the property, the mortgage servicer must automatically cancel the PMI." Since I owe around $140,000 and the property is valued at $220,000, was the PMI required? If so, will it automatically be cancelled? I want to hear what others have to say before I call up the lender and ask them. Any help will be greatly appreciated.
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Old 04-13-2015, 02:58 AM
 
Location: Southern California
4,350 posts, read 4,935,999 times
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When you purchased the house at $148,000 the value became $148,000. You can refinance to get a new loan without PMI or wait two years to get it appraised and request to have it removed. or worse case, wait for schedule payments to hit 78% of the original LTV.
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Old 04-13-2015, 05:48 AM
 
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Was it the banks appraiser that said it was worth 220k? If so then you shouldn't be required to pay pmi.
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Old 04-13-2015, 07:11 AM
 
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Your best bet will be to refinance with other lender. Your current lender has quite a few strings attached to remove it automatically. They have provision something along the line no late payment for the past six month or no later for more than a month on the past 1 year. Even then they will argue like the above poster said market value was the price that you bought and they would ask for improvemner that you made that can be demonestrated with document to increase the value significantly otherwise.

If you truly believe that you have way more equity in the house, your best bet is to go to the refinance route.
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Old 04-13-2015, 07:17 AM
 
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You can remove PMI if you pay the loan down by $22,200 (if 80% LTV suffices) or $25,160 (if 78% LTV is needed). Write two checks - one for the regular payment, and a second for "additional principal" or "principal reduction only".

Note: Might not work with FHA.

If you don't have the money, you might borrow it. See if anyone will give you a HELOC based on appraised value - which could be used to pay down the 1st enough to eliminate PMI. A fixed rate home equity loan is another option. The advantage of this over a refi is that you might not have to pay closing costs.

I don't know if any banks/CU's will let you, but if so, jump on it.

A HELOC or home equity loan, if you can get 80% LTV based on appraised value, will allow you to borrow about $50k - more than enough to pay down the 1st mortgage enough to eliminate PMI.

Last edited by ncole1; 04-13-2015 at 07:28 AM..
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Old 04-13-2015, 10:18 AM
 
Location: New York
2,251 posts, read 4,162,931 times
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.

OP has a conventional loan and put a 5% down payment.
  • My experience PMI can be removed on loan after 12 on time payments and when LTV reaches 78.5% on the amount financed. Going to have to pay $350 to $500 to the appraisal company the lender chooses.
  • The negative thing by refinancing to another lender. You'll have closing costs somewhere around $7000k (+5% of loan amount). The only way see as beneficial is if you cash out to pay off debt, or take out money for improvements.
  • The link OP posted on PMI Act Information, say's "contact your lender for further information".
.
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Old 04-13-2015, 11:54 AM
 
9 posts, read 10,206 times
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Quote:
Originally Posted by Modification Specialist View Post
.

OP has a conventional loan and put a 5% down payment.
  • My experience PMI can be removed on loan after 12 on time payments and when LTV reaches 78.5% on the amount financed. Going to have to pay $350 to $500 to the appraisal company the lender chooses.
  • The negative thing by refinancing to another lender. You'll have closing costs somewhere around $7000k (+5% of loan amount). The only way see as beneficial is if you cash out to pay off debt, or take out money for improvements.
  • The link OP posted on PMI Act Information, say's "contact your lender for further information".
.
Good information. I didn't know you had to pay for another appraisal once you reach 78.5% LTV. Wish it could be as easy as only getting the LTV to that amount and not have to pay appraisal again just to get out of PMI.
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Old 04-13-2015, 11:56 AM
 
Location: Somewhere in USA
537 posts, read 453,155 times
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PMI is not decided by you but the lender will demand it if you do not have enough cash to put down 20% and your loan is big. Depending on which lender you go with, some will make it a requirement for PMI.
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Old 04-13-2015, 12:51 PM
 
Location: New York
2,251 posts, read 4,162,931 times
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Quote:
Originally Posted by Yunghogg_Tx View Post
Good information. I didn't know you had to pay for another appraisal once you reach 78.5% LTV. Wish it could be as easy as only getting the LTV to that amount and not have to pay appraisal again just to get out of PMI.
The reason why lenders make it appear complicate to remove PMI. It is in the thier best interest to have insurance on a mortgage.
  • Makes the loan more secure.
  • Easier to sell loan to another servicer.
  • The borrower pays for it.
Value is something the homeowner has to stay on top of.

In my 15 years working with mortgages between different lenders. Although there has been a few times a lender (Wells Fargo) automatically did an AVM appraisal on the computer and removed PMI. Most times the home owner has to initiate themselves to have it removed.


..
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Old 04-13-2015, 01:37 PM
 
4,543 posts, read 11,549,619 times
Reputation: 3063
Quote:
Originally Posted by memopad85 View Post
I recently bought a house from a family member for $148,000 with a conventional loan and put a 5% down payment; the property was appraised at $220,000. In my loan packet, I have to pay PMI since I didn't put down 20%, but after getting home, I did more research and came across the HUD PMI Act:
(HUD PMI Act Information)

From what read on there, the PMI should be cancelled automatically: "when the homeowner's equity position reaches 22 percent of the original value of the property, the mortgage servicer must automatically cancel the PMI." Since I owe around $140,000 and the property is valued at $220,000, was the PMI required? If so, will it automatically be cancelled? I want to hear what others have to say before I call up the lender and ask them. Any help will be greatly appreciated.
A better route might have been:

185,000 purchase price
(37,000)20% gift of equity from the relative
148,000 loan amount & gross proceeds to seller

Then you wouldn't have PMI. The relative would have had to sign a gift letter, but they essentially gifted you the equity anyway.
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