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Old 12-28-2008, 12:48 PM
 
31 posts, read 213,819 times
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Hi guys,

The appraisal on the property I am buying came out to a little more than $20,000 above the purchase price. So bascially this means that I have instant equity, right? If this is so can I ask the lender to remove my PMI after we close? Are there any other benefits besides the obvious one in having a higher appraisal than the pruchase price?
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Old 12-28-2008, 01:29 PM
 
28,461 posts, read 75,166,723 times
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Not likely. You can ask now, but don't hold your breath. The lender is going to look at the purchase price and the cash you are putting in to determine initial equity in almost all cases.

It is good that the appraisal came in high enough to consider that PMI is not needed, you can revisit it as soon as your lender allows. Most are going to want a year or more of solid, incident free payments and of course property moving in the right direction...
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Old 12-29-2008, 12:50 PM
 
Location: Elkhart, IN
311 posts, read 852,976 times
Reputation: 268
Default Pmi

Quote:
Originally Posted by gc333 View Post
Hi guys,

The appraisal on the property I am buying came out to a little more than $20,000 above the purchase price. So bascially this means that I have instant equity, right? If this is so can I ask the lender to remove my PMI after we close? Are there any other benefits besides the obvious one in having a higher appraisal than the pruchase price?
I believe that the reason you are being required to pay PMI is because you are making less than a 20% down payment. The bank will probably require that you keep it, regardless of the amount its "valued" at right now. If all things remain and you establish a good payment history, you should be able to get the PMI removed when your loan to value ratio is at 80%. Good luck with it, sounds like you are getting a pretty nice deal
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Old 12-29-2008, 07:28 PM
 
406 posts, read 1,251,955 times
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actually i think it is 79%, not 80%. equity is an illusion. appraisers try to go a little over the loan value, which also contributed to the real estate bubble meltdown thingie. don't ever rely on your equity unless you are dealing in the here and now.

ready to sell? then you can safely use your appraisal. looking to cash out your equity? careful because you might get stuck paying a loan which isnt worth the home. right now equity is a dangerous thing to be playing with, whether buying or selling.
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Old 12-29-2008, 10:19 PM
 
Location: MID ATLANTIC
8,144 posts, read 20,001,656 times
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Like the others said, you can ask. Unfortunately, there are a few more boxes on that appraisal and if declining market is checked, you are probably going to have PMI for a long time.

The Homeowner's Protection Act of 1998 contains the provision to remove PMI and does not apply to government insured or guaranteed loans (VA & FHA).

"For home mortgages signed on or after July 29, 1999, your PMI must - with certain exceptions - be terminated automatically when you reach 22 percent equity in your home based on the original property value, if your mortgage payments are current. Your PMI also can be canceled, when you request - with certain exceptions - when you reach 20 percent equity in your home based on the original property value, if your mortgage payments are current.

One exception is if your loan is "high-risk." Another is if you have not been current on your payments within the year prior to the time for termination or cancellation. A third is if you have other liens on your property. For these loans, your PMI may continue. Ask your lender or mortgage servicer (a company that collects your payments) for more information about these requirements."

The foolproof way for the PMI to be dropped now would be to pay down the mortgage to 80% of the original purchase price, otherwise, you have a continuous moving target. Not trying to bust your good news, watch the sales coming in behind you. Values continue to drop. Look at it as a worse case insurance policy and if you are lucky, values will reverse and you can get out of the insurance.

Go check the appraisal, though, did he/she check "declining market" for the area? That's your first clue into your future.
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Old 12-29-2008, 10:41 PM
 
Location: Plano, Texas
1,675 posts, read 6,616,040 times
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First of all the value of the home you are buying is what you are paying for it as something is only worth what another is willing to pay. to the lender, the value of your home is the lesser of appraised value or purchase price, so regardless how much higher the appraisal came in at, to the lender your home is only worth what you are paying, so on paper you have instant equity but thats it. You can avoid pmi with less then a 20% down payment by either choosing lender paid mi or doing a 1st and 2nd lien.
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Old 12-30-2008, 06:48 PM
 
Location: Pawnee Nation
7,525 posts, read 15,424,356 times
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Quote:
Originally Posted by michael11747 View Post
appraisers try to go a little over the loan value.......
What a scurrilous remark. You show me an appraiser who "tries to go a little over the loan value" and I will show you an unethical appraiser in violation of state law (in all 57 jurisdictions and every country that has adopted USPAP). As soon as one of those "skippie" appraisers appear, we do our best to prove his lack of ethics and get his license revoked. As an AQB Certified USPAP instructor, a former appraisal board hearing officer, a former member of the disciplinary committee, (I withdrew, both as a hearing officer and disciplinary committee member when I started the appraisal school. It is unethical for me to recommend remedial education when I am trying to sell seats in my classes) an owner of a successful appraisal practice, an owner of a successful appraisal school, and a practicing appraiser for more than a quarter of a century, I find your comment highly offensive.
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Old 12-30-2008, 09:37 PM
 
Location: MID ATLANTIC
8,144 posts, read 20,001,656 times
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Quote:
Originally Posted by Goodpasture View Post
What a scurrilous remark. You show me an appraiser who "tries to go a little over the loan value" and I will show you an unethical appraiser in violation of state law (in all 57 jurisdictions and every country that has adopted USPAP). As soon as one of those "skippie" appraisers appear, we do our best to prove his lack of ethics and get his license revoked. As an AQB Certified USPAP instructor, a former appraisal board hearing officer, a former member of the disciplinary committee, (I withdrew, both as a hearing officer and disciplinary committee member when I started the appraisal school. It is unethical for me to recommend remedial education when I am trying to sell seats in my classes) an owner of a successful appraisal practice, an owner of a successful appraisal school, and a practicing appraiser for more than a quarter of a century, I find your comment highly offensive.
I applaud your response and verbiage, particularly "scurrilous." How appropriate in this situation. It's those appraisers that fed the frenzy that put us in this mess, coupled by the loan officers that demanded value that wasn't there.
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Old 12-30-2008, 10:00 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,365,839 times
Reputation: 958
Quote:
Originally Posted by gc333 View Post
Hi guys,

The appraisal on the property I am buying came out to a little more than $20,000 above the purchase price. So bascially this means that I have instant equity, right? If this is so can I ask the lender to remove my PMI after we close? Are there any other benefits besides the obvious one in having a higher appraisal than the pruchase price?

If I'm not mistaken you posted another thread about locking in your rate on an FHA loan. The MI requirements on an FHA loan are different than conventional. For the MI to be removed from an FHA loan, you must pay down the principal balance based off of the original purchase price (future appraisals mean nothing) to 78%, or pay for a minimum of five years, whichever is longer. You should be talking to your LO about this, and they should be able to tell you exactly what I did.
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Old 12-30-2008, 11:21 PM
 
Location: Escondido, CA
1,504 posts, read 5,642,968 times
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Which lender sets the rules on PMI removal? Do all conforming loans from Fannie Mae have the same rules?
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