Another housing question!

[Mommy Of A Little Angel]

I know I am asking a lot about house buying and such, but I have a new question for you all. Everyone has been so helpful so I am hoping that someone knows the answer to this question.

I know you have to pay PMI if you borrow more than 80%. What if you buy a house that is appraised at $250,000 but you get it for $200,000. Now, you are only borrowing 80% of the appraised value so do you still pay PMI or does it not matter?

Thanks! (And no I haven't found an amazing deal like this yet, just wondering!)

[Momof3Labs]

That pretty much won't happen. The appraisers that supply for the mortgage companies have a way of coming in awfully close to your sales price (unless you way overpay, in which case I know that the 80% is based on the lower appraisal value).

[kimbe]

It could be up to the mortgage company. It will either be 80% of what you've mortgaged or 80% of the appraised value -- they will usually pick the amount that works out in their favor, not yours. Does that make sense? You might want to check different companies to see how they do it and then pick the one that is going to work out better for you!

[gordo]

Sort of OT, but if you are looking to avoid paying PMI, you can look into an 80-10-10 mortgage. where you take a mortgage on 80% of the house and a home equity line of credity for the other 10% (assuming you are putting 10% down). That way you don't have to pay PMI.

[sdoyle]

I've done this with a house that was definately worth more than I paid. The appraiser does come in pretty close to what you pay because there is usually a lot of wiggle room in appraisals. Ask your mortgage broker if you can have the PMI removed if you have the house re-appraised and the value has gone up. They usually have you wait a year. At that time, you call and have to pay for a second appraisal but if it is 20% more than you owe, you can petition to have the PMI removed. Paying 1 year of PMI sure beats having to put 20% down you don't have!

With the non-traditional loans like an 80/20, 80/10/10, 5/1 or 7/1 ARM etc, the second "loan" is usually variable so if the rate goes up, so does your mortgage.

I was pretty (actually very) sure that the house would appraise for more so while I didn't get to write off the PMI, I saved a lot in interest down the road on my 30 year fixed without the worry of and adjustable rate. HTH!

Stacy

[SnuggleBuggles]

PMI differs depending on where you live. We only out 5% down on our first house and didn't have to pay PMI.

Beth