Mortgage on a short sale (PMI, loan, approve, loan)

[cdc3217]

OK, Say you had the opportunity to buy a SFH that was in short sale for 200,000. And lets say the appraised value of the home was 300,000. And lets say you had 20K for your down payment. In order to avoid PMI, can your mortgage only be for 80% of the purchase price, or can it be 80% of a current, assumedly higher, appraised value? I am wondering if we have to do a home equity loan (on our exisiting paid-in-full home) for the balance of the down payment, or can we just have 1 loan for greater than 80% of purchase price.

Advice?

[chet everett]

Purchase price. Always purchase price. Appraised value is not what matters for initial purchase PMI.

[suzie02]

If they sell you the house for 200k then the market value of the house is 200k.
Short sale means that the house is sold for less than the owner owes, it doesn't mean the house is worth less than comparable homes.

[cdc3217]

Thanks. I was just wondering if there was a simpler way than 2 loans. I guess not.

[suzie02]

Keep in mind that by borrowing the down payment from your existing home your ratios will change and the lender may not approve you for the new mortgage.

[chet everett]

While in technical sense suzie is correct that more debt of any kind does impact your ability to borrow, taking money out of ones existing house toward a down payment on replacement is about as cheap money as one can get...

Once the existing home is sold that debt is settle and lenders USED to have no problem with that, but in these days of shrinking equity they do run the appraisals a lot tighter.