Question Details

Carter Clayt…, Home Buyer in Atlanta, GA

Bank's appraisal came in high, really high. Can I avoid mortgage insurance?

Asked by Carter Clayton, Atlanta, GA Tue May 20, 2008

We are about two weeks from our expected closing date and I just got the bank's appraisal. It turns out that the amount financed is going to be less than 80% of the appraised value of the house. We had planned to put 5% down and do LPMI, with a higher interest rate. Now I'm thinking that it might be possible to avoid mortgage insurance all together. But I'm not really sure how these things work.

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Carter,

Since it is a 95% purchase and you are only putting down 5% the bank monst likey will not eliminate that mortgage insurance on your loan. It has been my experience in the past where you will have to have it for a certain amount of time. However once that time lapses all you have to do is contact one of your banks approved appraisers get the house appraised and submit it to that lender. Im surprised it came in that high 20% higher? So all the comps on the appraisal are very much similar and close to your property? If so you must have gotten a hands down steal. But talk to your lender to see what he knows of off hand. Let me know if you need anything else.

Brent Bester
Mortgage Professional
614-622-8916
bbester@usavingsbank.com
0 votes Thank Flag Link Tue May 20, 2008
No, they will go off the purchase price only.
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Tue May 20, 2008
I talked to the mortgage banker, he said that we would still have to pay mortgage insurance since we are only putting 5% down. However we changed the loan from a lender paid mortgage insurance loan to one where we paid the mortgage insurance and we saved .5% on the mortgage rate. Assuming the house retains its value we will be able to stop paying mortgage insurance after a year.

Incidentally the reason we got such a good deal on it is that it was an estate sale. It had previously been listed for closer to what it appraised for. The house has some odd "old lady" type of features, and the kitchen hasn't been renovated. I imagine that they weren't getting any bites so they dropped the asking price by a lot. We put a contract on it a few days after they reduced the asking price.
0 votes Thank Flag Link Tue May 20, 2008
You really should contact your lender to see what their requirements are. I am of the understanding that you have to be financing 78- 80% of the "sales price" not the appraised value.
0 votes Thank Flag Link Tue May 20, 2008
Aren't you the lucky one! My understanding is most mortgage companies want at least 6 months before they will eliminate the PMI. They will also most likely require a new appraisal to verify the value is still there.
Since you haven't closed yet, why not talk with your lender to see what your options might be.
0 votes Thank Flag Link Tue May 20, 2008
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