Updated over 4 years ago on . Most recent reply
Loan To Cost vs Loan To Value & PMI
I am in the process of purchasing my first investment property. While talking to my lender I am trying to understand the difference of the LTC vs. LTV in regards to my down-payment and PMI.
I am told that my down-payment need to be a percentage of the purchase price not of the value of the home to avoid PMI. I feel like I understand with a refinance why having 20% LTV will eliminate PMI but why doesn't LTV matter in the initial purchase?
I feel that if I pay 295 for the home and the appraisal comes back at 330 that putting 31k should eliminate the PMI. That would leave the loan at 80% LTV. Instead, I have to put 59k on a 295 purchase no matter the appraised value.
What am I missing? Is that right or should I look at a different lender?