@savagetyler wrote:
If I purchase a home that has a LTV value of 80% when I get a mortgage will I still have PMI?
Senerio to help explain:
FHA loan, home appraisal value is 200k
Purchase price $170k (85% LTV)
Down payment 5% 8,500 to bring to 80% LTV
Would PMI now not be needed?
^^^There is some confusion in the post above.
The LTV is a calculation based on your loan amount vs the purchase price. The lender has an appraisal done on the property to make sure the value supports the contract price. If there is a difference, then the lower of either the contract purchase price or the appraised value is used for your loan. The appraisal is there to protect the lender - not the buyer/borrower.
In your case, the appraisal came in higher than the contract purchase price so there would be no reduction of the loan amount.
Your LTV is not 80%. If your purchase price is $170k and you put down 5%, that makes your LTV 95%. MIP is required on FHA loans (PMI is for conventional loans, MIP is for FHA loans). You have your UFMIP + the monthly amount of MIP on a FHA loan for the life of the loan. In order to reduce the monthly MIP payment to 11 years, you would have to put down a minimum of 10%.
In order to take advantage of the good sales price, you can refi into a conventional loan in about a year. You would need to qualify for a conventional loan and the new lender will have to order a new appraisal. Check with the LO first to make sure they will use the new appraised amount rather than the purchase price. If you can refi with an 80% LTV at that time, then you won't have PMI to pay.
