LTV ratio?

[Anonymous]

I know LTV represents Loan to Value but my question is if a house is appraised for more than what you get it for and no money down for the loan, do I have to pay PMI?

The house  we are looking at will appraise easy for 330K. It is new, never lived in but has sat empty for 3 years.  The whole neighborhood is full with new construction going on still on the South side.  We have looked at this house off and on for the past 2 years. The original price was 399K but have dropped it to 297K.  I only guessed the appraisal amount from what the taxes are based on which I know are only an estimate. We are thinking about going even lower on an offer since it has sat for so long. So basically the house for what we would pay for it would be below 80% value of the house.  Would we have to pay PMI?  We are going to wait until June to pursue this.

We are in OK.  The housing here has not really been an issue.

[Anonymous]

When purchasing a home the value (of loan-to-value) is determined by the lessor of: the appraised value and the purchase price.

In your case, the purchase price would be lower so you can't use the appraised value to determine the ltv here.  PMI would have to be paid at 100% ltv (or anything above 80%).  On a conventional loan, you can ask the PMI to be waived after the fact if you can prove you have 20% equity.  Not sure if they will let you use the original appraisal or make you order/pay for a new one.  And I'm not aware of any standard length of time PMI needs to be in place before it can be waived.

[ShanetheMortgageMan]

Follow up to phxdevil's post... after you purchase the home, you can refinance and use the new appraised value, so if your new LTV is 80% based on the appraised value, you can do away with PMI at that point.