Appraisal came in low

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neo09
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Appraisal came in low

Post by neo09 » Mon Jun 13, 2011 8:11 pm

I am trying to get refinance, using penfed's 5/5 ARM product, with no moneys out of pocket sort of a deal.

As we expected, the appraisal came in low and we were kind of prepared to pay some money up front. to keep LTV under 80%. As of current appraised value, the LTV is at 85%.

Now, I wish I had that much money to bring the LTV to 80%, but I don't think I can scrape up the whole sum. The bank offered PMI option, as is, for about $85 per month, which is absurd IMO.

My questions are...

1) Can I fight the appraisal value?

2) What other option do I have other than to put hard cash down. I may have to raid taxable investment account to do so, if I decided to go that route.

thanks for your help

bombcar
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Post by bombcar » Mon Jun 13, 2011 8:58 pm

Pay the PMI and pay down the loan as quickly as possible; the moment you go below 80% LTV you can request the PMI removed.

neo09
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PMI

Post by neo09 » Mon Jun 13, 2011 9:04 pm

What is to stop them though, from saying that the value dropped further ?

I would like to stay away from PMI option as much as I can, because it's an insurance that is for their protection and gives me nothing in return.

I don't mind taking money out of taxable investment acct., if I HAVE TO. If there's a recourse to this, I'd like to find out sooner than closing.

rbowling
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Post by rbowling » Mon Jun 13, 2011 9:11 pm

I know with my mortgage, the appraisal that was done to write the mortgage was good for one year for use in determining the elimination of PMI. You may ask whether that would be the case for you and then get it in writing. That'd give you a year to scrape together cash without raiding investments.

avalpert
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Post by avalpert » Mon Jun 13, 2011 9:49 pm

You might want to check out this story - challenging their appraisals doesn't seem fruitful.

If you considered the PMI as part of the interest rate, would the rate still be enough that the refinance would be worthwhile?

mikep
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Post by mikep » Mon Jun 13, 2011 10:50 pm

This looks like one of the few cases where a loan from a 401(k) might be a good idea to bring your loan to value to 80%. Is it possible?

neo09
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401K loan

Post by neo09 » Tue Jun 14, 2011 9:06 am

I have read that 401K Loan is one of the worst forms of loans though.

Why not use taxable or emergency funds rather ? I am also thinking about a 0% credit card (with no balance transfer fees, of course).

Thanks

mikep
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Re: 401K loan

Post by mikep » Tue Jun 14, 2011 9:33 am

neo09 wrote:I have read that 401K Loan is one of the worst forms of loans though.

Why not use taxable or emergency funds rather ? I am also thinking about a 0% credit card (with no balance transfer fees, of course).

Thanks
Don't open a new credit card.. they will check your credit again at closing - new rule. If your score is lower, you may have to cough up more at the closing table, or worse, face re-underwriting of your loan.

401(k) loans are not good for avg American.. but for BH they are the best.. pay interest to yourself, and if it enables a refi to save overall interest than go for it. Search livesoft post on taking a 401(k) loan to avoid high fee funds and invest in 529s.. works for him.

I thought you didn't have/want to use taxable? Yes, that is best choice.

neo09
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Re: 401K loan

Post by neo09 » Tue Jun 14, 2011 9:43 am

mikep wrote:
neo09 wrote:I have read that 401K Loan is one of the worst forms of loans though.

Why not use taxable or emergency funds rather ? I am also thinking about a 0% credit card (with no balance transfer fees, of course).

Thanks
Don't open a new credit card.. they will check your credit again at closing - new rule. If your score is lower, you may have to cough up more at the closing table, or worse, face re-underwriting of your loan.

Thanks for this advise. Dummy that I am, I would have opened up a new CC looking for help.

401(k) loans are not good for avg American.. but for BH they are the best.. pay interest to yourself, and if it enables a refi to save overall interest than go for it. Search livesoft post on taking a 401(k) loan to avoid high fee funds and invest in 529s.. works for him.

Can I borrow against my IRA rolled over into Vanguard ? I will research this as well.

I thought you didn't have/want to use taxable? Yes, that is best choice.
I can come up with partial money from taxable, and may be the rest can come from a 401K loan.

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Ted Valentine
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Post by Ted Valentine » Tue Jun 14, 2011 10:01 am

You need to think long and hard about refinancing into an adjustable rate mortgage with less than 20% equity, a declining housing market, and the fact that fixed interest rates are practically at all time lows.

Now you're looking into throwing more money into this deal from your savings and 401k? Why, to recover $350 from an appraisal? That's potentially penny wise and pound foolish. Who's to say that you won't need refinance again in 3 or 5 years. Except this time rates are 6% or 7% and your equity is still not >80%? That's a real possibility.

Maybe I'm missing something about your current rate that makes refinancing imperative. I'd just walk away from the deal and try again in a year after you've paid down more of the principle.

The lesson I've learned is don't apply for a refinance unless you're 100% certain the appraisal will come it at the necessary LTV.
Although our intellect always longs for clarity and certainty, our nature often finds uncertainty fascinating.

Sulvar
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Post by Sulvar » Tue Jun 14, 2011 10:04 am

Pay the PMI and pay down the loan as quickly as possible; the moment you go below 80% LTV you can request the PMI removed.
It seems that banks are making it very hard to get PMI removed once you have it, so I wouldn't go this route. My experience last year was that I bought my house, put down 10% and got a mortgage with PMI. A few months later I come into some more money and paid down another 12% of the mortgage to get to 78% loan to value. I applied to get my PMI removed and was told that I could only get it removed if one of the following two conditions was met:

1) I had paid my mortgage (and the PMI) for 5 years and the LTV was under 78%. In this case the PMI would be automatically removed.

2) I had the property re-appraised, the LTV was less than 80%, AND the property value had not declined from the purchase price.

I was very surprised at the conditions in option 2 for removing PMI. Despite the fact that I had appraised the property just a few months early during the purchase, I had to have it re-appraised at my own expense. The bank also told me that regardless of LTV, PMI wouldn't be removed if the appraisal was lower than the original purchase price. I was shocked at this, but luckily the appraisal came in above my purchase price so PMI was removed.

natureexplorer
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Re: Appraisal came in low

Post by natureexplorer » Tue Jun 14, 2011 10:09 am

neo09 wrote:I am trying to get refinance, using penfed's 5/5 ARM product, with no moneys out of pocket sort of a deal.

As we expected, the appraisal came in low and we were kind of prepared to pay some money up front. to keep LTV under 80%. As of current appraised value, the LTV is at 85%.

Now, I wish I had that much money to bring the LTV to 80%, but I don't think I can scrape up the whole sum. The bank offered PMI option, as is, for about $85 per month, which is absurd IMO.

My questions are...

1) Can I fight the appraisal value?

2) What other option do I have other than to put hard cash down. I may have to raid taxable investment account to do so, if I decided to go that route.

thanks for your help
Why a 5/5 ARM if you have trouble finding an additional 5%? It sounds like you will be having this mortgage for a lot longer than 5 years. Sounds kind of risky to me, but I of course don't know your financial situation.

How did you end up with a property in which you have only 15% equity? Did you start out with PMI or did the value drop that much?

neo09
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Valuation

Post by neo09 » Tue Jun 14, 2011 10:23 am

Value hasn't dropped "than much", IMO. But the way appraisals work, they are based on "recent sales" of similar homes in area.

There are no recent sales of similar homes, in similar location to ours (cul-de sac) and we are getting dinged with comparision to inferior properties.

natureexplorer
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Re: Valuation

Post by natureexplorer » Tue Jun 14, 2011 10:25 am

neo09 wrote:Value hasn't dropped "than much", IMO. But the way appraisals work, they are based on "recent sales" of similar homes in area.

There are no recent sales of similar homes, in similar location to ours (cul-de sac) and we are getting dinged with comparision to inferior properties.
So you currently don't have PMI?

neo09
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Re: Valuation

Post by neo09 » Tue Jun 14, 2011 10:32 am

natureexplorer wrote:
neo09 wrote:Value hasn't dropped "than much", IMO. But the way appraisals work, they are based on "recent sales" of similar homes in area.

There are no recent sales of similar homes, in similar location to ours (cul-de sac) and we are getting dinged with comparision to inferior properties.
So you currently don't have PMI?
No, we have no PMI.

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Cava
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Location: Orlando, FL

Post by Cava » Tue Jun 14, 2011 11:14 am

I don't know if you are eligible but if you are Navy Federal Credit Union doesn't usually charge any PMI.

neo09
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Post by neo09 » Tue Jun 14, 2011 11:31 am

Cava wrote:I don't know if you are eligible but if you are Navy Federal Credit Union doesn't usually charge any PMI.
Every one of these financial institutions has their own quirks, it seems. It's kind of late for me to restart an application at this point, but I hope it helps someone else in the future.

Thanks

jack1719
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Re: Valuation

Post by jack1719 » Thu Jun 16, 2011 11:56 am

neo09 wrote:Value hasn't dropped "than much", IMO. But the way appraisals work, they are based on "recent sales" of similar homes in area.

There are no recent sales of similar homes, in similar location to ours (cul-de sac) and we are getting dinged with comparision to inferior properties.

The apprasial did not come in low,you just had it too high..

http://www.youtube.com/watch?v=wEqjUInKXOo

Appraisal process is broken down in three parts..comps are just one part..

bigk
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Post by bigk » Thu Jun 16, 2011 9:34 pm

Sulvar wrote:
Pay the PMI and pay down the loan as quickly as possible; the moment you go below 80% LTV you can request the PMI removed.
It seems that banks are making it very hard to get PMI removed once you have it, so I wouldn't go this route. My experience last year was that I bought my house, put down 10% and got a mortgage with PMI. A few months later I come into some more money and paid down another 12% of the mortgage to get to 78% loan to value. I applied to get my PMI removed and was told that I could only get it removed if one of the following two conditions was met:

1) I had paid my mortgage (and the PMI) for 5 years and the LTV was under 78%. In this case the PMI would be automatically removed.

2) I had the property re-appraised, the LTV was less than 80%, AND the property value had not declined from the purchase price.

I was very surprised at the conditions in option 2 for removing PMI. Despite the fact that I had appraised the property just a few months early during the purchase, I had to have it re-appraised at my own expense. The bank also told me that regardless of LTV, PMI wouldn't be removed if the appraisal was lower than the original purchase price. I was shocked at this, but luckily the appraisal came in above my purchase price so PMI was removed.
Agreed. I recently had a very difficult and aggravating time trying to get out of my PMI with Bank of America. First, it took about 3 months and countless phone calls just to get a good answer from them about how I could get out. I finally got something in writing from them that they would let me out of my PMI if I brought my loan to value under 80% of my original purchase price, but I had to also get an appraisal to confirm current market value. I was fine with that, but since I was going to have to put up around $30K to bring the LTV under 80%, I didn't want to send the check until after the appraisal came back. I didn't want a situation where I sent in the check, they low-balled me on the appraisal, and then I had to either cough up more money or else keeping paying PMI but with $30K less in my pocket. Anyway, I ended up getting the appraisal, and the appraiser sent in the report, but BoFA told me about a month later that they wouldn't even look at the number until I sent in the check. It was a completely ridiculous conversation:

me: "Just tell me the number. If the appraisal was ok I will send the check tomorrow."

BoFA: "We can't tell you until you send the check."

me: "That makes no sense. If you have the report just open it and tell me the number."

and so on and so on. To make a long story short, I decided to refinance and just put up the extra cash as part of the refinancing to avoid PMI. I will never deal with Bank of America again for any product after that.

As it so happens though, I came across the PenFed 5/5 ARM deal about a month after I closed my refinance, so I am now in the process of refinancing again with PedFed! I figured I might as well considering PenFed is picking up all closing costs.

Sulvar
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Post by Sulvar » Fri Jun 17, 2011 10:10 am

Agreed. I recently had a very difficult and aggravating time trying to get out of my PMI with Bank of America
The situation I described above was with Bank of America as well. I would rank the PMI removal process as my most frustrating financial transaction in the last 5-10 years or so.

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hand
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Post by hand » Fri Jun 17, 2011 11:36 am

Add a third vote for Bank of America being terrible about PMI removal.

In the end it made more sense for me to do a "cash-in" refinance with another lender than to continue to deal with BofA. It is shocking to me the extent to which large banks are willing to take advantage of folks who are financially unsophisticated.

At the end of countless calls with B of A I was so disgusted that I resolved never to do business with them again and to share my poor experiences with others as often as possible.

neo09
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Thanks

Post by neo09 » Fri Jun 17, 2011 2:10 pm

Thanks for confirming my doubts, I have initiated an appraisal review process stating my points (upgrades to the house and comp values from within past 6 months).

Now they are saying the "review" may take upto 2 weeks, just a wait and watch game at this point.

Though I have full faith in PenFed, I am starting to believe that these companies will chew laypeople for breakfast, at this rate. So much red tape and no straight answers.

I am guessing this contesting appraisal is going to prove futile, but I have already given them a week and we will see what happens in another week.

Will keep posted

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