PMI Insurance?

[NeXXuS]

Oklahoma - What is PMI based on, is it sale price of the house or is it the appraised value of the house?

I am trying to put down as little as money as possible but still avoid paying PMI, I am purchasing a house for a few thousand under appraised value. My lender is telling me that I have to put down 20% of the sale price which is more money down obviously than 20% of the appraised value which is about 6K higher. So, it makes about a 6K difference on what i would have to put down. What does the law state, what do I tell me lender, is he correct?

I have done my research for a couple of days now and I cannot find any clarification on what the VALUE refers to, is it Sale Price, or is it Appraised value - because they are two very different numbers in most cases.

thank you,

James J.

Tulsa OK

 

[amortgageman]

The original PMI calculation is based on the lower of purchase price or appraisal. PMI insurance can be cancelled after one year if the loan balance is lower than 80% of the appraised value. (FHA is calculated from the original loan amount).

My suggestion would be to look at a combination of 80% first mortgage and 5% or 10% second mortgage, and accelerate the payments on the second mortgage to retire the debt earlier, thus leaving you with a nice first mortgage with no PMI. These are ofteen referred to as an 80/10/10, or 80/15/5, with the last number representing the down payment percentage.

 

[NeXXuS]

Thank you very much - if you don't mind another question, what law or whatever constitutes the lesser of the two at purchase, the price or the appraisel or is that usually determined by the lender in question or is that regulated by the state?

 

[HomeGuru]

Thank you very much - if you don't mind another question, what law or whatever constitutes the lesser of the two at purchase, the price or the appraisel or is that usually determined by the lender in question or is that regulated by the state?

**A: the lender determines the criteria which financing is always based on the purchase price or appraisal, whichever is the lesser.