PMI on live and flip

8 Replies

Hello. I currently have a single family foreclosure under contract and I'm looking for a creative way to get into it without a %20 down payment. The home is in need of mostly cosmetic repair and should appraise for the agreed sales price. It is in rough shape though and not live able to most. Due to a near settlement date I am unable to do a conventional rehab loan. My hang up is the PMI underwriter. Thoughts on a way around this?

If you go less than 20% down you're pretty much stuck with the PMI unfortunately. If I'm not mistaken FHA now doesn't drop off their PMI even when you've built up your equity. So if you choose to go with less and don't want to get stuck with PMI long term I'd go 5% conventional.

I am okay with having the PMI. I need the the 5% down to have money left for renovations.My issue is because of the rough shape of the home my realtor and broker feel getting someone to underwrite it for PMI will be tough.

@Kevin Kennerly with the low down payment numbers, I expect you know you will need to owner occupy. Have you looked at the FHA 203k loan? It is pretty much designed for that type of situation.

Hello Kevin,

Have you considered maybe asking the seller to keep the existing financing in place and buying the property subject-to the existing mortgage? You stated that the property is in foreclosure, if that's the case you will need to have the seller request a reinstatement amount from the bank and see what those numbers look like in order to determine if this is a viable option for you.

Good luck!

@Kevin Kennerly You're misunderstanding something here.....PMI underwriters don't concern themselves withproperty conditions, the lender's underwriter does, as it has to meet Fannie/Freddie guidelines. By it being a "foreclosure" I assume you mean it's an REO, which means they won't let you (knowingly) do any repairs to meet financing guidelines.

i managed to get the settlement date pushed back to make the 203k possible. Thanks for the input guys!

I recently found out there is sometimes a way to reduce your monthly PMI payments from a couple hundred ish to under $50 by paying a point up front...split PMI I think the mortgage gal called it. I'm not super educated on it but worth looking into if it may help your deal work?

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here