Refinance to knock off PMI or automatic?

1 Reply

This is a semi-introduction, semi-question I haven't been able to find information on. Perhaps I need to up my Google game!

Hi there, My name is Adam Pond and my brother, Matthew and I are budding Real Estate Investors in the Austin & San Antonio markets. We'll be BRRRR'ing as many Single Family homes as we can handle and I am eternally grateful to the BiggerPockets community as a freaking awesome resource! Before I found this community I had little to no idea what the word "Equity" even meant! I've learned so much and gained so much confidence to make that leap! I believe I've clocked 100+ hours or so on the podcasts so far. Now on to the question:

Our first offer has been accepted at 142,000. Woohoo! The estimated ARV is 174,000 per comps in the area. Well, this particular property wouldn't technically be considered a BRRRR considering we won't be Reno'ing it. It has recently been renovated by the previous owner. We're currently working with a lender to obtain an FHA loan with 3.5% down. But that means the ominous PMI. Gasp! So that'll be approximately 1% a.k.a. $118/month. Now I'm aware that the lender does an appraisal on purchase mortgage. But my question is this - On the appraisal coming back at ~174,000, will the PMI fall-off be factored at 113,600 (80% LTV on 142,000) or would the PMI fall-off be factored at 139,200 (80% LTV at 174,000)? Would we be required to refinance to receive a new mortgage at 174,000 in order to shed PMI immediately or does it automatically fall off based on the new FMV? Also hypothetically, the appraisal comes in at only 160,000 and the 80% LTV is 128,000. Is it possible or even worth it to pay 14,000 additional (142k-128k=14k) to get us below that PMI immediately?

Anybody who can answer this, know that I am very grateful for any and all help. And you are A.W.E.S.O.M.E !!

Warmly, 

- Adam 

Originally posted by @Adam Pond :

This is a semi-introduction, semi-question I haven't been able to find information on. Perhaps I need to up my Google game!

Hi there, My name is Adam Pond and my brother, Matthew and I are budding Real Estate Investors in the Austin & San Antonio markets. We'll be BRRRR'ing as many Single Family homes as we can handle and I am eternally grateful to the BiggerPockets community as a freaking awesome resource! Before I found this community I had little to no idea what the word "Equity" even meant! I've learned so much and gained so much confidence to make that leap! I believe I've clocked 100+ hours or so on the podcasts so far. Now on to the question:

Our first offer has been accepted at 142,000. Woohoo! The estimated ARV is 174,000 per comps in the area. Well, this particular property wouldn't technically be considered a BRRRR considering we won't be Reno'ing it. It has recently been renovated by the previous owner. We're currently working with a lender to obtain an FHA loan with 3.5% down. But that means the ominous PMI. Gasp! So that'll be approximately 1% a.k.a. $118/month. Now I'm aware that the lender does an appraisal on purchase mortgage. But my question is this - On the appraisal coming back at ~174,000, will the PMI fall-off be factored at 113,600 (80% LTV on 142,000) or would the PMI fall-off be factored at 139,200 (80% LTV at 174,000)? Would we be required to refinance to receive a new mortgage at 174,000 in order to shed PMI immediately or does it automatically fall off based on the new FMV? Also hypothetically, the appraisal comes in at only 160,000 and the 80% LTV is 128,000. Is it possible or even worth it to pay 14,000 additional (142k-128k=14k) to get us below that PMI immediately?

Anybody who can answer this, know that I am very grateful for any and all help. And you are A.W.E.S.O.M.E !!

Warmly, 

- Adam 

FHA mortgage insurance w/ 3.5% down is stuck for the life of the loan, eg you'd need to refi to drop it.

There are conventional 3% and 5% down non-FHA options where it drops off once you have the equity without needing to refinance.