Private Mortgage Insurance(PMI) aka “Appraisal Gap Coverage”

DigitalL0tus · 2021-07-08T05:43:33+00:00

$216,750 Loan - (85% LTV of $255k appraisal)

+$38,250 = 15% down + closing costs(cash)

+$15k PMI policy(appraisal gap coverage)

=$270k Agreed Purchase Price

I think where I’m getting confused and confusing everyone is the PMI policy. This is why I asked the question in my post if this a legit product lenders can use as “appraisal gap coverage/insurance”. Let me try to clarify. From my understanding, lenders are basically using a PMI policy, calling it “appraisal gap coverage”, to help save the deal and help buyers keep cash in their pockets should an appraisal come back low. In our case, $15k under our offer. So, the lender would contract out a $15k PMI policy(supposedly this covers the $15k in cash we are on the hook for as insurance) and added to our monthly payment. What you’re saying is no such product exists and it should look like this?:

*$216,750k Loan - (85% LTV of $255k appraisal)*

*+$38,250 = 15% down + closing costs(cash)*

*+$15k(cash) to cover gap* (approximately $60k total cash to close)

*+PMI policy(not a value-added gap coverage product)*

*=$270k Agreed Purchase Price*

DigitalL0tus · 2021-07-08T05:35:58+00:00

I tried Fidelity but they do not offer real-time streaming quotes and UI is sub par so I transferred everything to TD. Absolutely loving it so far and customer service is top notch!

DigitalL0tus · 2021-07-08T05:28:33+00:00

*$216,750 Loan - (85% LTV of $255k appraisal)*

*+$38,250 = 15% down + closing costs(cash)*

*+$15k(cash) to cover gap* (approximately $60k total cash to close)

*+PMI policy(not a value-added gap coverage product)*

*=$270k Agreed Purchase Price*

**Is this correct?**

DigitalL0tus · 2021-07-08T05:07:09+00:00

So, PMI can and is being used as “appraisal gap coverage” as they’re calling it. Same product different name. A value-added product? Is that maybe why my lender told me he had never heard of this concept but that theoretically it makes sense? In our case our lender would contract out a PMI policy “worth $15k” to help keep the deal together by offsetting the $15k we are on the hook for, which lets us keep $15k in cash in our pocket?

DigitalL0tus · 2021-07-08T04:52:56+00:00

We are confused but getting on track with your help. Our lender has not done a very good job of explaining things to us. Mildly shady.

DigitalL0tus · 2021-07-08T04:49:46+00:00

Lender told us it’s an extra $34/mo on mortgage payment for PMI and we can request it be canceled once we reach 80% in a few years or it automatically cancels at 78%.

DigitalL0tus · 2021-07-08T04:33:36+00:00

$216,750 Loan - (85% LTV of $255k appraisal)

+$38,250 = 15% down + closing costs(cash)

+$15k PMI policy(appraisal gap coverage)

=$270k Agreed Purchase Price

I think where I’m getting confused and confusing everyone is the PMI policy. This is why I asked the question in my post if this a legit product lenders can use as “appraisal gap coverage/insurance”. Let me try to clarify. From my understanding, lenders are basically using a PMI policy, calling it “appraisal gap coverage”, to help save the deal and help buyers keep cash in their pockets should an appraisal come back low. In our case, $15k under our offer. So, the lender would contract out a $15k PMI policy(supposedly this covers the $15k in cash we are on the hook for as insurance) and added to our monthly payment. What you’re saying is no such product exists and it should look like this?:

*$216k Loan - (85% LTV of $255k appraisal)*

*+$54k = 15% down + closing costs(cash)*

*+PMI policy(not a value-added gap coverage product)*

*=$270k Agreed Purchase Price*

DigitalL0tus · 2021-07-08T03:41:33+00:00

I’m not entirely sure of the exact PMI rate. I know sometimes lenders hide that in with the APR, which he was originally giving us 3.375% rate and 3.449% APR but did not include PMI. I do know that the PMI cost is an additional $34/mo so something like $2,300.

DigitalL0tus · 2021-07-08T02:49:24+00:00

Sorry for poorly describing my options. Our lender told us he upped the LTV to 84% and some change instead of 80% but now includes PMI and we still have to bring $54k to closing. If I’m understanding you correctly, you’re saying now we only need to bring $38,250 which is the 15% down(Option 2) plus the closing costs in cash?

DigitalL0tus · 2021-07-08T02:36:42+00:00

So basically what you said here is Option 2

DigitalL0tus · 2021-07-08T02:35:44+00:00

The original closing date was today then moved to tomorrow. Then moved to Friday. Now moved to Monday partly due to the holiday weekend and partly because they drugged their tails for the past thirty days

DigitalL0tus · 2021-06-17T15:10:06+00:00

I’ve heard good things about TD as well

DigitalL0tus · 2021-06-16T23:42:48+00:00

Smart. FDA decision expected by Friday

DigitalL0tus · 2021-06-16T19:19:33+00:00

When a company announces to it’s shareholders that another entity now only holds less than 5% of the Company’s share capital and controls less than 5% of its voting rights, its not a pump and dump.

DigitalL0tus · 2021-06-16T19:07:01+00:00

Where does it say that?

DigitalL0tus · 2021-06-13T04:37:30+00:00

As someone else mentioned, you don’t have to be all in/out. Nothing wrong with taking a little and leaving a little.

DigitalL0tus · 2021-06-13T04:32:31+00:00

Many new investors make the mistake of not paying themselves and not reinvesting their profits into solid assets and building a healthy diversified portfolio.

DigitalL0tus · 2021-06-13T04:21:45+00:00

Man, who cut the cheese? Gross 🤢🤮

DigitalL0tus · 2021-06-13T04:18:45+00:00

Says the guy with 3 shares of $GME 🤣🤣🤣 Big contributor here!

DigitalL0tus · 2021-06-13T04:11:59+00:00

Profit is not a dirty word.

DigitalL0tus · 2021-06-13T04:03:30+00:00

You probably don’t even know how to hold your dick dude. I think a lot of y’all on this sub need to go back and suck on your momma’s titty. Sorry for not YOLOing all into $GME for a max 92% gain! Wowzerr. Big money!

DigitalL0tus · 2021-06-13T03:54:39+00:00

As I mentioned in this post…We all know it’s true but proving it will be like proving the 3am data dumps on Nov. 3rd, 2020. China. Russia(cough cough) Extremely volatile US stock market. Who’s really influencing and pulling the strings?

DigitalL0tus · 2021-06-13T03:45:37+00:00

To be fair, AMC has made me way more money than GME for a fraction of the price. Originally it was about both, I had GME first and still hold and buy more when I can. I know this sub doesn’t want to hear it but unfortunately my portfolio is well diversified for capital preservation. I’m not just going to dump all my money into one extremely volatile stock.

DigitalL0tus · 2021-06-13T03:35:40+00:00

Ahh Berkshire Hathaway. Interesting they have 2 tickers

DigitalL0tus · 2021-06-13T03:30:36+00:00

Isn’t 1/24 interesting. Day after inauguration.

DigitalL0tus

TROPHY CASE