NEW mortgage crash coming soon...

The MI (frequently known as PMI...but that's just an MI company) companies are tightening up like I've never seen. Within a couple of months it looks like you won't be able to buy or refi a home at over 95% LTV without a 680 middle score.

This is gonna be fucking HUGE.

 

It seems like when i bought my house in 2000, you couldn't do that.

I always thought, back then, that 10% down was minimum, and 20% down was preferred.

I'm guessing all that changed, and then changed back?

 

I bought a house in 2003. It was a little easier, but not nearly as easy as the one I bought last year. I printed out a couple of bank statements, some invoices, some receipts, and put no money down. Looking back, renting would have made more sense.

 

I have a question that relates to this. I am currently renting a house from my sister. I plan to buy it from her at some point. It has a tax value of about $75k and she only owes about $60k on it. She plans to sell it to me for what she owes on it when we close. She has paid the original loan down from what was originally about $68k.

If I try to borrow the $60k she owes on it will the bank consider that a 100% financing? I would not be paying anything down but I would not be borrowing 100% of the value either.

 

Thelt, they will only be concerned about the LTV (Loan to Value) so if it is worth 75K and your loan is for 60K, then your LTV will be 60/75 or 80%. Doing that loan should allow you to not have to get PMI which is good for you.

BTW, 680 has been used for a few months by some of the banks for marketing purposes. Not sure if they will do a loan for someone with less than 680 but they sure aren't advertising to them.

 

How do they determine the value though. I have always heard that what you are paying for it is the market value and therefore a 100% LTV loan unless you pay money down.

 

Little trickier. If my home is worth $500,000 and I sell it to you for $200,000....and you borrow $200,000...it's a 100% LTV transaction. Your case is a little different. Since it's a relative, she can give you a "gift of equity." Keep in mind, the lender doesn't give a flying shit what the tax value is. Only what the hope appraises to.

 

You're correct. Absolutely.

 

No, the bank will order an appraisal which will actually determine the value they will use. The appraiser will base his/her value on the homes that have sold around your home (non-foreclosure sells ie "normal" sells). The appraisal is based on market value in other words. Course, the strange thing is that you can order two appraisals and they can be several thousand dollars different. It really does come down to that appraisers opinion. I recently sold a rental property and there was no way that the sales price was valid for that market but the appraiser got it through (not that I complained).

The appraised value is independent of your loan in other words. Now, a few years ago with 100% deals happening all over, the appraiser would typically just come back and give a few thousand over the sales price. Part of why we are in this mess now

 

Freakshow, you bring up a good point. Won't that technically be considered a 15K gift from his sister to him? Possible tax implications with that.