My wife and I are looking to buy a house that needs some work. Although we have enough cash to put 20% down, we'd like to put only 10% down to have the extra cash for renovations. However, I don't want to be beholden to PMI for 2 years as a result. Once we renovate and sell our current house, we can apply those proceeds to the loan and refinance, and be well below the 78% PMI threshold. However, I've read that PMI must apply to a loan for a minimum of 2 years before it can be waived, regardless of how much cash is applied towards a loan after origination.

Does anyone know of a way around this requirement? I hate the idea of having PMI for 2 years when my loan will actually be >78% for only a couple months. Thanks.

First with very good credit your PMI rate will be surprisingly low at 10% down.

I will try to confirm tomorrow if the following is true. At 80% equity it's up to the lender. At 78% they are mandated to take off. I will email my lenders tomorrow

Sounds like you could do an 80/10/10 loan. It's two loans. One for 10% of the sales price at a higher interest rate that you use towards the larger loan. So you are still putting 20% down towards the whole house but you are borrowing half of it. Then once your house is sold or as convenient, pay off the 10% loan. We did something similar for our first house.

Another thought is I need to check the rule on a straight buy down vs having to use increase value with a new appraisal.

GigEmAgs08 said:

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Sounds like you could do an 80/10/10 loan. It's two loans. One for 10% of the sales price at a higher interest rate that you use towards the larger loan. So you are still putting 20% down towards the whole house but you are borrowing half of it. Then once your house is sold or as convenient, pay off the 10% loan. We did something similar for our first house.

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Thanks, I read that as an option too but it seemed like the rate might be higher that way too.

SteveBott said:

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First with very good credit your PMI rate will be surprisingly low at 10% down.

I will try to confirm tomorrow if the following is true. At 80% equity it's up to the lender. At 78% they are mandated to take off. I will email my lenders tomorrow

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Thanks, if you know for sure, that would be so helpful. What I've read seemed to indicate that PMI remains for a two year minimum even when the 78% threshold is met much sooner.

Again assuming very good credit two loan will be .25% higher on the big loan and the second at 5.25 vs 90% loan with lower rate and cheap PMI my clients are going with one loan and the lower rate.

PMI pricing has really changed the 18-24 months. The cost is dramatically more variable based on your credit score.

OP one of the warnings I give my clients is ask me not run down endless rabbit holes. There is overwhelming too much info and much is not updated. 2105 mortgage internet posts are worthless. If searching at least stick posts that are dated late 2017 and better 2018.

My rules change monthly at times.

SteveBott said:

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First with very good credit your PMI rate will be surprisingly low at 10% down.

I will try to confirm tomorrow if the following is true. At 80% equity it's up to the lender. At 78% they are mandated to take off. I will email my lenders tomorrow

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They are mandated to take it off at 78% according to the original amortization schedule, i.e. you can't pay extra and have it automatically fall off. You can pay extra and get it down to 80%, then pay to have an appraisal/broker opinion to prove the property value has not dropped, and then have it removed. Just went through this a couple months ago on a Freddie Mac loan.

OP sorry I have been very sick this week.

First from the CFPB

https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/

This does not answer your specific question. So I contacted my best lender account exec. here is her email....

Quote:

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Good Morning, Steve!

I attached letters specific for FNMA and FMAC and below is a quick breakdown:

On Caliber originated loans the borrower can request to cancel PMI at any time and the 24 month payment history can be waived should the loan meet the following requirements:

Borrower make a principal payment to reduce the LTV to 80% within 180 days from the original appraisal date. The loan would qualify for PMI cancellation without validating the original property value.

Borrower makes a principal payment to reduce the CLTV to 80% after 180 days from the original appraisal date. CHL is required to obtain an independent BPO/Appraisal as we must warrant the values given to achieve the required LTV at the borrower expense.

Current Value - For loans with less than 24 months of payment history and the LTV is above the 80%,cancellation of PMI is based upon rent appraised value and is approved only if the request for PMI removal is made by the original borrower(s) on the mortgage and substantial structural home improvements were made to the property which resulted in an increase in property value. Appraisals are required when the property is two years or less in age. The appraiser must clearly indicate the specific nature and extent of the improvements made. The appraiser must also indicate in the appraisal how the improvements impact the estimated market value. These substantial structural home improvements must conform to local zoning and building codes.

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So it looks like the lender has some decision making in the process. This is the best I can do.

Edit the Fannie/Freddie docs referenced I can send you but not here. CHL is the lender I contacted. My email is in my profile

Thanks for your help!
This sounds like it would apply for me and what I'm wanting:

"Borrower make a principal payment to reduce the LTV to 80% within 180 days from the original appraisal date. The loan would qualify for PMI cancellation without validating the original property value."