by Guest » Tue Jun 08, 2010 05:11 pm
IF DOING A FHA 203K LOAN, AND AFTER THE REPAIRS ARE MADE, YOU HAVE LEFT OVER MONEY IN ESCROW, THAT MONEY IS THEN AUTOMATICALLY IS APPLIED TO THE PRINCIPLE. IF, BY DOING THAT, THE MORTGAGE AMOUNT DROPS BELOW THE 80% IMMEDIATELY, WILL PMI BE DROPPED?
Posted: Tue Jun 08, 2010 05:35 pm Post Subject:
Early in our married life, the first few houses we bought we had to have PMI....I have always had to 'point out' to a mortgage company that my balance is below 80% so let's knock off the PMI..and they have...I don't think I'd leave it to them to 'catch' this...as far as your other information, (203k loan, after repairs?) I honestly have no idea what you are talking about...Bottom line though is if your loan balance is 80% or less than the appraised amount, you can request your PMI stop.
Posted: Tue Jun 08, 2010 05:45 pm Post Subject: THANK YOU
203K LOANS ARE LOANS FOR HOMES THAT NEER TO BE REPAIRED, YOU CAN BORROW EXTRA MONEY, PROVIDED THE VALUE OF THE HOME AFTER THE REPAIRS IS WORTH IT. THE MONEY IS PLACED IN AN ESCROW ACCOUNT UNTIL THE REPAIRS ARE MADE AND THEN IT IS RELEASED ACCORDINGLY. IF YOU BORROW AND EXTRA 50K TO MAKE REPAIRS AND IT ONLY COSTS 30K TO MAKE THEM, THE REMAINING 20K IS THEN APPLIED TO THE PRINCIPLE OF THE MORTGAGE. I WAS WONDERING IF THAT WOULD BE A FINANCIALLY GOOD IDEA TO DO AS A WAY OF ALMOST "BORROWING" THE EXTRA MONEY NEEDED TO HAVE THE 20% DOWN PAYMENT. THEREFORE ELIMINATING THE NEED FOR PMI.
Posted: Tue Jun 08, 2010 09:33 pm Post Subject:
It's people who attempted to "game" the mortgage business that have caused much of the financial turmoil affecting the US today.
How do you figure borrowing the down payment makes your loan to value less? Isn't the lender going to estimate the value of needed repairs and advance that amount? If the repairs are estimated at $30,000, why would they consider putting up $20,000 extra?
Your logic appears to be faulty.
Posted: Mon Aug 16, 2010 06:53 pm Post Subject:
The bank will put up the $20k when you have a detailed rehab contract showing what that money is to be used for. When the loan is issued they disperse the money in draws to pay your contractors.
What the OP is asking is if the whole amount is not used and the leftover funds pay down the principle to the 80% LTV, can he get rid of PMI. Me thinks the answer is yes because the bank initially issued the funds for the repairs and if they go unused they HAVE to apply back to the principle. If that reaches appropriate LTV mark I don't see why they wouldn't be obligated to ditch the PMI.
203k is a very different animal. A lot of misinformation out there from people who don't understand it.
Posted: Tue Aug 17, 2010 03:41 am Post Subject:
The bank will put up the $20k when you have a detailed rehab contract showing what that money is to be used for. When the loan is issued they disperse the money in draws to pay your contractors.
Think about what you have said here. The bank loans $20,000 for repairs, and let's say the repairs consume $10,000, leaving $10,000 to pay down principal.
How could that conceivably get the loan to less than 80% LTV, unless we're talking about a $50,000 loan (including the $20,000 rehab loan)?
What you conjecture is utterly insane.
Posted: Tue Aug 17, 2010 08:41 am Post Subject:
Isn't it like taking from peter to pay paul?
Posted: Tue Aug 17, 2010 01:50 pm Post Subject:
Isn't it like taking from peter to pay paul?
Yes, exactly. The OP's proposal makes no sense on its face. You borrow money from the lender to pay down what you owe the lender?
Absurd. How can that possibly reduce the loan %% to avoid PMI?
Now, the potential exists that a person could obtain "private financing" that the lender on the 1st mortgage is not aware of, and any unused funds could be paid to the 1st mortgage. But FHA is death on hidden financing, and, if I'm not mistaken, can immediately call the loan if it discovers that undisclosed financing exists (borrowed money from a family member to make the down payment, etc) or if the property is not owner-occupied as agreed to in obtaining the 1st mortgage financing.
So, that still makes my math in response to anonymous79's $20,000 rehab loan correct. It would only work on a 1st mortgage of $49,999. AND the borrower would have to incur the expense of proving that the LTV was below 80%. (Also assumes the "rehab" adds no value to the property. To do so makes for a wild hypothetical, such as $10,000 in repairs adds $100,000 in value.) Plus FHA loans are based on MIP, not PMI, which is essentially a prepaid premium added to the loan amount that will be "short-rate" refunded, and then the continuing mortgage payments will reduce. (DISCLAIMER: I haven't been involved in FHA financing in years, so things could be a bit different today. I just know I never again want to have anything to do with an FHA loan, either as a borrower or as a seller.)
As an aside, I completed a $250,000+ (equity-financed) major home remodel this time 2 years ago, at exactly the same time the wheels fell off the housing market "train ride to wealth" courtesy of AIG, Lehman Bros, B of A, Citi (a former employer), Countrywide, et al., and intended to have the property refinanced based on its newly reduced LTV due to the added value, only to have the home appraised at the time for $25,000 less than the existing mortgage -- so much for that plan! (The current mortgage has no PMI, but the property still won't quite appraise for 80% LTV to avoid PMI in new financing, so I'll have to wait another 18 months or so before I try again (assuming the market doesn't sink again, which is a distinct possibility if unemployment never begins to dance in a different direction). Sucks!!
Posted: Wed Aug 18, 2010 03:33 am Post Subject:
Sounds like people in the banking industry are geniouses, or at least can talk faster than this individuals can think.
People never cease to amaze me in their ability to come up with ridiculous banking and financing tips.
But this comes from someone who thinks all banks are evil. :wink:
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