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I read that I may be required to pay PMI for a certain period of time (say: 2 years) before I can get it removed. Is that common?
Is it possible to remove PMI if my house appreciates? Let's say I buy a fixer-upper for 500k with 450k mortgage, I do some renovation work, to the point where it can be appraised for 575k. Now my 450k mortgage is less than 80% LTV. Can I hire an appraiser and petition for my PMI to be removed?
The best way to get rid of pmi is to never get it. So, if you are buying a 500k home and doing 50k down, then do a first mortgage of 400k, a 2nd lien of 50k and put 50k down.
Not only that, in some areas like mine around Dallas, conventional loans only go to 417k, if you do 1 loan for 450k and where buying in this area, your rate would be in the 7's as this is a jumbo loan. Doing a 1st lien of 400k today on conventional would get you a 5.875% rate.
And if that wasnt enough, you could also waive escrows meaning pay taxes and insurance your self and not with the mortgage payment. If that is important to you. Since the first lien is 80% or less of the purchase price you get the option to not escrow. Doing it as 1 loan, you generally do not get the choice. I like choices.
With all that being said, you can do what you said about hiring an appraiser then ask lender to remove, but make sure you ask the lender for the name of an appraiser they accept appraisals from.
Amazing. Lenders must have lost billions on piggy-backs around here. 2 out of 3 foreclosures had a 2nd loan or a HELOC and, with prices 30-40% off the peak, those piggy-backs have all been wiped out. Hard to imagine that they'd continue doing them.
Maybe it depends on the area? What kind of interest rate do you usually get?
Here in Texas no where near the problem. with 5% down around 8.25, 10% down 7.25. Those are for 15 yr fixed, if you want a 30 due in 15 balloon, add a .25%.
Most lenders in CA aren't doing 2nds above 80% CLTV due to the very reasons esmith143 laid out. They are getting practically zero in foreclosure sales these days. Victor is just lucky that TX has restrictive cash out laws and high property taxes, I think that is what really has saved them from prices getting out of control there. They get all of the easy qualifying mortgage programs =/
I agree with you Shane, we didnt bend our clients over like what happened to Californians. They were sold the hype from a false market. You are also right, we do have high property taxes, but no state income tax. How is the state income tax in Cali?
I also wanted to add another thought in regards to Shanes statement of us being lucky that Texas has restrictive cashout laws. I disagree with that cause it has nothing to do with luck, it has more to do with being smart. It was a conscious decision of Texans to limit the about of money you can access of your home equity, and that has definitely helped maintain our property values here. It was also a conscious decision of Califorians to allow people to access equity to 100% and i think they even allowed a cashout to 125% of the appraised value. Hopefully Shane or any other Califorian loan officer can let us know if that is true. So, i dont think it has to with luck, i think it has to do with passing smart laws. Imagine if California would have had the same laws as Texas, we might not be in the situation we are currently in.
I don't know about home equity rules in Texas. Here, the ability to buy a house with zero down and minimal or no documentation must have definitely contributed. But that's just one of many things. SoCal real estate developed a minibubble by 1990-91 and, when it burst, RE ended up in an extended depression. By 1997 houses were quite a bit undervalued. Add falling mortgage interest rates, and the fact that SoCal has limited developable land. So, prices went up and homebuilders were unable to build fast enough. From 1997 to 2002-2003 we had a long period of honest & steady appreciation (around 100%). That made people think that RE always goes up and it is a good way to make money. The rest is history.
CA property tax is typically 1-1.1% and there's a caveat - property tax bill can't go up by more than 2%/year, whatever happens to the appraised value. So it's common for long-time homeowners to pay $1000/year or $2000/year on a house that's worth $500,000. That is obviously a huge problem for CA budget and for CA schools. To compensate for the lack of property tax revenues, we're hit with high income taxes (9.3% on all income above certain level). New developments usually have special property taxes called Mello Roos on top of state 1%. (Total of 1.7% is not uncommon)
Last edited by esmith143; 11-21-2008 at 06:43 PM..
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